Nov 08, 2018 (China Knowledge) - The Chinese foreign-exchange reserves have seen its biggest monthly drop in 18 months, as trade war brews with strong U.S. dollar hurting the value of its holdings. This might suggest potential move by the Chinese authorities to introduce interventions to keep the yuan from depreciating further.
China's foreign reserves have fallen by USD 33.93 billion in October to USD 3.053 trillion as seen in the data released by the central bank yesterday. The drop was the biggest monthly decline faced by China since December 2016.
The Chinese foreign exchange regulatory agency, State Administration of Foreign Exchange (SAFE), believes that the fall will only be around for a short while as it attributes it to the adjustment in global asset prices and a stronger U.S. dollar.
As the Chinese hold a large variety of foreign currencies including Euro, and Yen, the reserves fall is not unexpected because these currencies have also weakened as the dollar has strengthen.
Earlier last month, Reuters has reported the Beijing’s attempt to restrict outward investment amidst the brewing trade war with the U.S. The regulators had tightened control through restricting individuals and businesses from bulk buying large foreign-currency purchases and remittances. The foreign-exchange administration has also imposed more than USD 30 million in fines for violation by individuals who had tried to skirt the control imposed by the authorities.
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