China: Record reserves meltdown – ANZ

By FXStreet FXStreet (Delhi): Khoon Goh, Senior FX Strategist at ANZ, notes that the China has witnessed the biggest monthly decline on record in its forex reserves in August, leading to decline in its reserve adequacy.

Key Quotes

“China’s FX reserves recorded a decline of USD93.9bn in August to USD3,557.4bn. This is the largest monthly decline on record. Since peaking at USD3,993.2bn in June 2014, China’s reserves have now fallen by USD435.8bn.”

“We think the decline in the reserves does not fully capture the total FX intervention undertaken by the PBoC. While China’s FX reserves remain large at USD3.56trn, its reserve adequacy has declined. Based on one measure, it is at the midpoint of the IMF’s suggested range.”

“The PBoC will likely continue to keep the RMB stable to dampen depreciation expectations. But its ability to intervene is not limitless, and at some point it will need to step back and allow the market to determine the CNY rate.”
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Source:: FX Street