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China's forex reserves fall by $8.23 bn due to dollar appreciation

Foreign exchange reserves fell by 0.26 per cent in August after a two-month gaining streak in June and July, China's State Administration of Foreign Exchange (SAFE) said

Press Trust of India  |  Beijing 

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China's foreign exchange reserves, the highest in the world, fell by USD 8.23 billion in August as a result of an appreciating US dollar and now stand at the lowest since October last year, experts said Sunday.

fell by 0.26 per cent in August after a two-month gaining streak in June and July, China's State Administration of Foreign Exchange (SAFE) said in statement.

"The fall in reserves is due to a 0.6 per cent appreciation of the US dollar," Guan Tao, a former senior SAFE official, told state-run Global Times on Sunday, adding that the numbers fell within a normal volatility range.

"Exchange rates naturally rise and fall - the figures don't warrant any need for central bank intervention," said Guan.

The total reserves now stand at USD 3.10972 trillion, the lowest level since October 2017.

The value of China's 59.24 million ounces of gold bullion reserves also fell to USD 71.228 billion, due to the yellow metal's depreciation.

Xu Hongcai, deputy chief economist at the Centre for Economic Exchanges, agrees with the diagnosis, pointing out that the strength of China's external trade in August backs up stable

"Around one-third of China's are kept in euros, but the official figures are given in the equivalent in US dollars. As the euro has depreciated against the US dollar, the total foreign exchange reserves have gone down in value," Xu said.

"In nominal terms, China's reserves must have actually increased at the end of August. Exports were strong and we had a current account surplus," said Xu, adding that also recorded a surplus in its August capital account, without any large-scale capital outflows.

Another SAFE official told state-run Xinhua News Agency on Saturday that political and economic risks have been increasing around the world this year, with many emerging markets suffering economic damage amid increased market volatility.

However, China's foreign exchange reserves have remained stable due to the nation's continued stable growth and the increased flexibility of the yuan's exchange rate.

First Published: Sun, September 09 2018. 18:25 IST
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