EM central banks (ex-China and OPEC) sell reserves – Nomura

By FXStreet Research Team at Nomura, notes that the EM central banks ex-China and OPEC countries sold $9.7bn of foreign currencies in January.

Key Quotes

“Of the 20 EM central banks we track (excluding China and oil producers), 9 sold reserves, 4 bought, and 7 did not intervene.

• We estimate that Hong Kong sold $4.9bn of foreign currency during the month of January, after having bought $2.8bn in December.

• Mexico continued to intervene, selling $1.2bn of foreign exchange reserves in January, compared with $0.7bn in December. Heavy selling of FX reserves in November was due to the $200mn per day of FX sales which started at the end of July and terminated in November (selling of $2.8bn). The Banxico’s new rule is to intervene initially with a daily depreciation of 1%, with an option to intervene again at 1.5%, if necessary, resulting in lower overall interventions.

• We estimate that Taiwan bought reserves at a pace of $0.8bn in January, after having sold $2.5bn of reserves in January.

Turning to China, we estimate that the PBoC sold around $93.9bn of FX reserves in January. This relatively large drawdown is consistent with recent action from the PBoC to stabilize market expectations. Since 8 …read more

Source:: FX Street