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China rebuilding forex reserves

China rebuilding forex reservesSubscribe to the FT to read: Financial Times China’s leaders split over policy for $3tn forex reserves. Become an FT Subscriber. Gain access to global coverage from local journalists on the ground in 50+ countries working around the clock to break news, analyze, spot risks and opportunities. Join over 300,000 Finance professionals who already subscribe to the FT. China’s foreign exchange reserves in unexpected June rise despite trade threats and yuan’s worst month on record. Reserves up $1.51 billion, after a drop of $14.23 billion in May, even against backdrop of escalating tensions with the US. Reuters UPDATED : Monday, 9 Jul 2018, 10:48PM. China’s foreign exchange reserves unexpectedly rose in June, driven by changes in the value of its holdings and even as concerns of a full-blown trade war between Beijing and Washington rattled markets. Reserves rose $1.51 billion in June to $3.112 trillion, compared with a drop of $14.23 billion in May, central bank data showed on Monday. Economists polled by Reuters had expected reserves to drop by $10.6 billion to $3.10 trillion. The small increase in reserves was due to asset price changes, the State Administration of Foreign Exchange (SAFE) said in a statement. The Chinese currency and equity markets had been on edge ahead of last Friday, when US tariffs on $34 billion worth of Chinese goods kicked in. Beijing has retaliated with tariffs on US products of the same value.

The heightened Sino-US trade tensions have sparked concerns of capital outflows from China and threatened to pile more pressure on the Chinese currency. In June, the yuan suffered its worst month on record, falling 3.25 per cent against the US dollar. June also represented the worst month for Chinese stocks in more than two years. Capital flight was seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy. Last year, the yuan reversed three straight years of depreciation against the US dollar and China’s cross-border capital flows went from net outflows to basically stable. The yuan fell through a key psychological level of 6.7 on the US dollar last Tuesday. The Chinese authorities made remarks the same day to assure markets it would keep the currency stable. China’s forex regulator said in the commentary on Friday it expects the country’s foreign exchange reserves to remain stable, despite rising trade protectionism and Federal Reserve interest rate increases. Despite the market tumult in the past week, China appears broadly comfortable with a weakening yuan and would intervene only to prevent any destabilising declines or to restore market confidence, policy insiders told Reuters. Authorities are also confident they will not have to make heavy use of the official foreign exchange reserves to defend the yuan as they did during 2015 when stocks and the currency went into a tailspin.

The value of China’s gold reserves fell to $74.071 billion at the end of June, from $77.323 billion at the end of May. China forex reserves rise slightly as U. S. dollar weakness continues. BEIJING (Reuters) - China’s foreign exchange reserves rose slightly in March as broad U. S. dollar weakness continued and escalating trade tensions between the world’s two largest economies bolstered expectations of a firmer Chinese currency. Reserves rose $9 billion in March to $3.143 trillion, compared with a drop of $27 billion in February, central bank data showed on Sunday. Economists polled by Reuters had expected reserves to increase by around $6 billion in March to $3.14 trillion. Capital flight was seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy. Last year China’s reserves rose for the first time since 2014 and its cross-border capital flows went from net outflows to basically stable. China’s foreign exchange regulator said in late March it expected cross-border capital flows to remain basically stable this year. The Chinese currency rose 0.8 percent versus the U. S. dollar in March and posted its biggest quarterly gain in a decade during the January-March period. Caitong International attributed the recent yuan strength partly to the newly launched crude oil futures in Shanghai, which the brokerage said triggered demand for the yuan from foreign investors. In 2017, the yuan rose around 6.8 percent against the greenback, reversing three straight years of depreciation. The Trump administration slapped hefty tariffs on steel and aluminum imports last week and then announced 25 percent tariffs on some 1,300 Chinese industrial technology, transport and medical products this week in an attempt to force changes in Beijing’s intellectual property practices. In response, China has slapped extra tariffs of up to 25 percent on 128 U. S. products including frozen pork, as well as on wine and certain fruits and nuts, and said it would soon announce more measures of equal intensity and scale against U. S. goods. The looming specter of a trade war between the two countries fueled expectations that Beijing may be happy to see a stronger yuan at this stage to defuse tensions with Washington. The value of China’s gold reserves rose to $78.419 billion at the end of March, from $78.064 billion at the end of February.

Composition of Foreign Exchange Reserves 2015. According to the OECD, foreign exchange rate reserves are the stocks of foreign currency denominated assets plus gold, held by a central bank. More simply, they are the assets of the central bank held in currencies outside the home country currency. Next Page : Full Report. A reserve currency, also called an anchor currency, is a currency that is held in significant quantities by numerous governments and central banks as part of their foreign exchange reserves. These currencies are used to transact global business, and are the pricing currency for global trade—particularly in commodities such as gold, and oil. The primary reserve currency used worldwide is the US dollar, followed by the euro—the official currency of the eurozone -- the British pound, the Japanese yen, and the Swiss franc. Foreign exchange reserves data is released quarterly by the IMF in its Currency Composition of Official Foreign Exchange Reserves (COFER) statistics. COFER consist of a monetary authority’s claims on non-resident liquidity in the form of: foreign bank notes, bank deposits, treasury bills, short - and long-term government securities, and other claims usable in the event of balance of payments needs. The amount of foreign exchange reserves that a country can claim is used as an indicator of the ability to repay foreign debt, and is used in sovereign credit ratings. Reserves are also used for currency defense—to halt downward or upward pressure on a currency against a benchmark currency. Closely related to foreign reserves, and also affecting debt repayment capability and credit ratings, are holdings in sovereign wealth funds. Over the last decade, countries in the developing world have been growing their foreign exchange reserves at an impressive rate, expanding them several times over. If, in 2004, Advanced economies held less around 20% more reserves than Emerging and Developing economies (with US$2 trillion to US$1.67 trillion), by 2013 this relationship had more than flipped, with Emerging and Developing economies controlling more than double the reserves of Advanced economies (US$7.9 trillion to US$3.8 trillion).

During the Great Recession of 2007-2009 global reserves dropped from a peak of almost $7.5 trillion in mid-2008 to just under $7 trillion by February 2009, primarily as countries tried to manage currency depreciation and used reserves to fund stimulus packages. By the end of the first quarter of 2009, foreign reserves had once again begun to rise—and that trend continued since. According to the CIA’s World Factbook, the top ten foreign-exchange holding countries -- China, Japan, European Union, Saudi Arabia, Switzerland, Russia, Taiwan, Brazil, South Korea and Hong Kong – have over two-thirds of global reserves. The amount of reserves that a country should hold is not set in stone, although one common benchmark is holding enough to cover external debt for one year. Changing the Reserve Currency. The dominance of the US dollar has long been a source of contention between the world’s largest economic players, in part because it allows the issuing country—namely the United States—to purchase commodities at a small discount as they do not have to incur the exchange rate charges, although this charge becomes minimal for major currencies. In addition, the issuing country has an advantage in terms of cost of borrowing as it means the market for that currency is generally stronger than for other currencies. Global economists and policymakers have long proposed that a currency other than the US dollar should be the main reserve currency for global business. Countries such as Russia and China, along with a number of central banks and economists have suggested the use of an independent currency to replace the dollar. In March 2009, Zhou Xiaochuan, governor of the Central Bank of China, posted an open letter on the Central Bank’s website calling for a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”. He advocated the use of a new currency based on the Special Drawing Rights of the IMF. Special Drawing Rights (SDRs) are international foreign exchange reserve assets, allocated by the IMF to nations, which represents a claim to foreign currencies. Proponents of SDRs suggest tying them to a basket of currencies—including the US dollar, the euro, the yen and the pound--to create a new, independent currency. In late 2009 UNCTAD relea. Foreign Exchange Reserves. What is 'Foreign Exchange Reserves' Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies.

BREAKING DOWN 'Foreign Exchange Reserves' Foreign exchange reserves are used to back liabilities and influence monetary policy. This refers to any foreign money held by a central bank, such as the United States Federal Reserve Bank. These reserves can include banknotes, deposits, bonds, treasury bills and other governmental securities. These assets serve many purposes but are most significantly held to ensure that a central government agency has backup funds if their national currency rapidly devalues or becomes all together insolvent. It is a common practice in countries around the world for their central bank to hold a significant amount of reserves in their foreign exchange. Most of these reserves are held in the U. S. dollar, since it is the most traded currency in the world. It is not uncommon for the foreign exchange reserves to be made up of the British Pound (GBP), the Euro (EUR), the Chinese yuan (CNY) or the Japanese yen (JPY) as well. Economists theorize that it is better to hold the foreign exchange reserves in a currency that is not directly connected to the country’s own currency in order to provide a barrier should there be a market shock. However, this practice has become more difficult as currencies have become more intertwined as global trading has become easier.

Foreign Exchange Reserves Around the World. The world's largest current foreign exchange reserve holder is China, a country holding more than 3.5 trillion of their assets in a foreign currency. Most of their reserves are held in the U. S. dollar. One of the reasons for this is that it makes international trade easier to execute since most of the trading takes place using the U. S. dollar. Saudi Arabia also holds considerable foreign exchange reserves, as the country relies mainly on the export of their vast oil reserves. If oil prices begin to rapidly drop, their economy could suffer. They keep large amounts of foreign funds in reserves to act as a cushion should this happen, even if it’s only a temporary fix. Subscribe to the FT to read: Financial Times China’s forex reserves drop $70bn as outflow accelerates. Become an FT Subscriber. Gain access to global coverage from local journalists on the ground in 50+ countries working around the clock to break news, analyze, spot risks and opportunities. Join over 300,000 Finance professionals who already subscribe to the FT. China December forex reserves rise to $3.14 trillion, highest since September 2016. BEIJING (Reuters) - China’s foreign exchange reserves rose to their highest in more than a year in December, blowing past economists’ estimates, as tight regulations and a strong yuan continued to discourage capital outflows, central bank data showed on Sunday.

Notching up their 11th straight month of gains, reserves rose $20.2 billion in December to $3.14 trillion, the highest since September 2016 and the biggest monthly increase since July. That compares with an increase of $10 billion in November. Economists polled by Reuters had expected reserves to rise by $6 billion to $3.125 trillion. Capital flight had been seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy. The yuan rose around 6.8 percent against the greenback in 2017, recovering from a 6.5 percent loss in 2016 and reversing three straight years of depreciation. For the full year, China’s FX reserves rose $129.5 billion from $3.011 trillion at the end of 2016. That’s the first annual rise since 2014. China’s foreign exchange regulator said in a statement on its website that it would keep the nation’s forex reserves and international balance of payments “balanced and stable” in 2018. The country’s reserves dropped by nearly $1 trillion from a peak of $3.99 trillion in June 2014 to $2.998 trillion in January 2017 as it sought to shore up the yuan and reduce potentially destabilizing capital outflows. But reserves have since climbed by $142 billion. Despite the improved capital flow picture, China’s State Administration of Foreign Exchange has continued a clampdown on the movements of funds abroad. The regulator announced last month it would cap overseas withdrawals by people using domestic Chinese bank cards starting this year. Some major global acquisitions by Chinese firms have also been put on ice by regulators, who fear they are really intended to disguise movements of capital offshore, though Beijing has maintained genuine investments will still be approved. China’s central bank reported net foreign exchange buying for the third consecutive month in November, marking a policy victory for the authorities after a long battle to stabilize the yuan, although analysts say capital flows are likely to remain volatile as the economy slows.

Economists polled by Reuters expect the yuan to depreciate slightly this year if the dollar firms. The value of gold reserves rose to $76.47 billion at the end of December, from $75.833 billion at the end of November, data on the People’s Bank of China’s website showed. Reporting by Josephine Mason, Meng Meng and Cheng Fang; Editing by Himani Sarkar. 10 Countries With The Biggest Forex Reserves. Foreign currency reserves are vital to a nation's economic well-being. Without adequate reserves, an economy can grind to a halt. The country may be unable to pay for critical imports like crude oil or service its external debt. The International Monetary Fund (IMF) defines reserve assets as external assets that a country’s monetary authority can use to meet the balance of payments financing needs, use to affect currency exchange rates in currency exchange markets, and other related purposes. Most nations hold the vast majority of their foreign currency reserves in U. S. dollars and a much smaller portion in euros. A sizeable war chest of foreign currency reserves is especially handy during a currency crisis since it can be used to defend against speculative attacks on the national currency. Russia, which holds substantial foreign currency reserves, is a good example. In 2014, the United States and the European Union imposed economic sanctions on Russia for its involvement in the Ukraine conflict.

Coupled with a 50 percent plunge in the price of crude oil (Russia's largest export and a key driver of its economy), these sanctions severely impacted the Russian economy. The ruble slid 40 percent against the dollar in 2014, but the outcome could have been far worse had Russia had not intervened in foreign exchange markets to prop up the ruble, expending more than $80 billion of its reserves in doing so. The ruble further strengthened throughout 2015-2018 as the political situation in Ukraine has somewhat calmed. Further potential sanctions related to the Skripal poisoning could have a dampened effect as the " the Russian economy has adapted to the post-sanctions environment and is less dependent on foreign goods or flows than a few years ago," said Robert Simpson of Insight Investments in an email to MarketWatch. China forex reserves rise slightly as U. S. dollar weakness continues. BEIJING (Reuters) - China’s foreign exchange reserves rose slightly in March as broad U. S. dollar weakness continued and escalating trade tensions between the world’s two largest economies bolstered expectations of a firmer Chinese currency. Reserves rose $9 billion in March to $3.143 trillion, compared with a drop of $27 billion in February, central bank data showed on Sunday. Economists polled by Reuters had expected reserves to increase by around $6 billion in March to $3.14 trillion. Capital flight was seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy. Last year China’s reserves rose for the first time since 2014 and its cross-border capital flows went from net outflows to basically stable.

China’s foreign exchange regulator said in late March it expected cross-border capital flows to remain basically stable this year. The Chinese currency rose 0.8 percent versus the U. S. dollar in March and posted its biggest quarterly gain in a decade during the January-March period. Caitong International attributed the recent yuan strength partly to the newly launched crude oil futures in Shanghai, which the brokerage said triggered demand for the yuan from foreign investors. In 2017, the yuan rose around 6.8 percent against the greenback, reversing three straight years of depreciation. The Trump administration slapped hefty tariffs on steel and aluminum imports last week and then announced 25 percent tariffs on some 1,300 Chinese industrial technology, transport and medical products this week in an attempt to force changes in Beijing’s intellectual property practices. In response, China has slapped extra tariffs of up to 25 percent on 128 U. S. products including frozen pork, as well as on wine and certain fruits and nuts, and said it would soon announce more measures of equal intensity and scale against U. S. goods. The looming specter of a trade war between the two countries fueled expectations that Beijing may be happy to see a stronger yuan at this stage to defuse tensions with Washington. The value of China’s gold reserves rose to $78.419 billion at the end of March, from $78.064 billion at the end of February. Yuan, Equities Eye on US-China Tariffs, Foreign Reserves and Lending. by Renee Mu , Currency Analyst. Fundamental analysis, polices, China.

Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Renee Mu. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. CNH Forecast Talking Points: Fundamental Forecast for CNH: Neutral. The Chinese Yuan and equites could take further hits from additional US-China tariff battles. No significant drop in China’s foreign reserves may help to improve market confidence.

A controlled expansion in lending may leave room for PBOC to cut RRR further. The Chinese Yuan had a volatile week: it escalated losses from last week and dipped an 11-month low against the U. S. Dollar, then bounced back by more than 1100 pips following multiple PBOC officials ’ expressing confidence in the currency . On Friday, Yuan’s volatility continued amid both US and China’s tariffs kicking in; it eventually lost against the U. S. Dollar on a weekly basis. Chinese equities improved on Friday, though on a weekly basis remained week, with Shanghai Composite Index sinking for the seventh week in a row. Looking forward, the US-China trade war will continue to be a top driver to the Yuan and Chinese equities. China sees the trade war has officially begun after the US tariffs went into effect . It is expected that the largest two economies in the world will launch more tit-for-tat attacks against each other; what unknown is how much more tariffs will be imposed and how long the battles will last. Over the weekend, both sides could release details of further moves and thus worth to keep a close eye on. In terms of the timing for the two countries returning to the negotiating table , it may be determined by how much pressure American farmers and manufacturers can bring to the White House, especially those who have voted US President Trump into the office. Chinese tariffs directly target at them: agriculture, aquatic and auto producers. Next week, China will release the trade prints for June . A breakdown in Chinese imports may reveal some clues on how much American exporters have suffered from the US-China trade disputes. Yet, even if bilateral talks resumed, challenges remain as China would need to reach deals with divided US groups with different goals: cutting US trade deficit and changing China’s industrial policy.

The first one is more negotiable and a deal was close to reach ; the latter one reflects the i ncreasing competition between the two countries , which may not be easily to solve very soon. Besides uncertainties around the trade, the Yuan and Chinese equities will bear event risks next week. The June Foreign Reserves will be released on Monday. No significant drop may help to improve market confidence in financial stability, which may help to further ease the selling pressure in the Yuan and stocks. According to Bloomberg, the gauge is expected to fell slightly from $3110.62 billion in the prior month to $3101.80 billion. Another important indicator is the New Yuan Loans , which the PBOC follows closely as a measure of financial risks. Cutting leverage is one of the regulator’s top focuses. It could make the financial system healthier in the long run, while in the short-term a liquidity shortage may worry the equity market. Thus, the regulator will need to balance the both. A controlled expansion in lending could leave more room for the PBOC to cut reserve requirement ratio again, which will help to ease the tension in the equity market. -- Written by Renee Mu, Currency Analyst with DailyFX.

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  • China rebuilding forex reserves