China's foreign exchange reserves hit near 3-year low

In November, China's foreign exchange reserves continued to fall by 87.2 billion USD to the lowest level since early 2013.

The People’s Bank of China (PBOC) has been selling dollars to prop up the yuan ahead of a meeting last month to consider whether to include the yuan in the International Monetary Fund’s (IMF) reserve basket. That has reduced its foreign-exchange reserves to $3.44 trillion, down from $3.53 trillion at the end of October. The median forecast of economists surveyed by Bloomberg was $3.49 trillion.

China has been continuously selling USD to prop up its currency since August. Photo: China Daily.

China’s reserves have lost $405 billion over the year, data released today showed. The depreciation of the euro, yen and pound last month may also have contributed to the decline in the value of the reserves when converted into dollars.

This figure may understate the PBOC’s intervention efforts, as the bank also trades in the forward market to support its currency. The yuan will officially be included in the IMF’s Special Drawing Rights (SDR) basket on October 1, 2016. Analysts, including Goldman Sachs Group, expect the currency to depreciate next year as capital flows out, economic growth slows, and central bank intervention wanes.

PBOC Deputy Governor Yi Gang said last week that the central bank’s long-term goal is to have little to no market intervention, and that larger currency swings would be the norm.

According to VNE