Net foreign exchange sales by China’s central bank in August were the highest in six months as the bank sought to support the yuan, official data showed on Wednesday.
The People’s Bank of China sold a net 191.9 billion yuan ($28.7 billion) worth of foreign exchange in August, according to Reuters calculations based on central bank data released on Wednesday. That is the highest figure since February, when net sales were 227.9 billion yuan.
China’ foreign exchange reserves fell by $15.89 billion in August to $3.185 trillion, the lowest since 2011, central bank data showed. The decline signaled renewed capital outflows, though most analysts described them as modest at this point, unlike heavy outflows last year and in early 2016. The yuan has been trading at near six-year lows, but has recovered slightly since July.
The August fall in reserves came even as China achieved a foreign trade surplus of $526.05 billion that month, official data issued on Sept 8 showed.
According to a Reuters survey of 18 fund managers, analysts and currency traders in late August, market positioning in the Chinese yuan was estimated to be the most bearish since late July, after hawkish comments by Federal Reserve officials rekindled bets US interest rates would rise this year.
China’s yuan firmed on Wednesday as banks sold dollars amid elevated borrowing cost in the offshore yuan market in Hong Kong.
The CNH Hong Kong Interbank Offered Rate benchmark, set by the city’s Treasury Markets Association, is fixed at 8.161% for overnight contracts, the highest level in seven months.
Offshore yuan borrowing rates have been elevated since late last week, and market players have different theories on why. Some say China’s central bank pushed the borrowing rates higher to dampen yuan short-sellers, and others believe it is just due to short-term liquidity concerns.
