China’s Forex Reserves Fall to 4-Year Low in February

China’s Forex Reserves Fall to 4-Year Low in February

China’s forex reserves continued to decline in February for 4 months in a row.

World’s largest forex reserve has hit its lowest level since December 2011.

According to a recent data released by China’s central bank, People’s Bank of China (PBOC), China’s forex reserves declined US$ 28.57 billion in February sending total forex reserves to US$ 3.20 trillion at the end of February.

The recent fall in February followed a US$ 99.5 billion decline in January and the US$ 107.9 billion in December, the biggest monthly drop ever.

However, the recent drop in February was slightly less than what most economists had expected. Most of them estimated that China’s forex reserves would fall US$ 30 billion from its current US$ 3.23 trillion in January.

The February data also indicated that Chinese Government is curtailing its interventions to support the currency.

The People’s Bank of China had decided to seal dollars in the currency market to support Yuan, which sent the forex reserves declining US$ 513 billion last year, the largest yearly drop in China’s history.

For this year, People’s Bank of China expects the fall in forex reserves to remain moderate on the expectation of Yuan will stabilize.

Zhou Xiaochuan, central bank governor had earlier said that the recent changes in the countries forex reserves were normal and there is no need to worry.

For the past one year, China is using its forex reserves to hold up a weakening currency following a US$ 1 trillion capital outflows in 2015, according to a Bloomberg report.

China’s forex exchange peaked to almost US$ 4 trillion in 2014 from US$ 21.2 billion way back in 1993.

In early 2016, People’s Bank of China has allowed seven more foreign financial institutions to enter China’s inter-bank forex market. These were Reserve bank of India, International Finance Corporation, Bank of Indonesia, Bank of Thailand, Bank of International Settlement, Monetary Authority of Singapore and Bank of Korea.

After the approval from the central bank, these foreign financial institutions will be able to participate in China’s inter-bank forex market as foreign members.

Categories: News
Tags: china, forex

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