The Chinese currency may come under more pressure in May and June, given rising market expectations of a Fed rate hike next month, Iris Pang, senior economist for greater China with Natixis Asia said before the figures were announced. And depending which way you look at them, both are true.
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CHINA’S foreign exchange reserves rose for a second straight month in April, as fears about a weak yuan and capital outflow eased amid increasing signs of stabilizing economic growth.
Meanwhile, China’s gold reserves stood at 58.14 million fine troy ounces at the end of April, up from 57.79 million fine troy ounces at the end of March, the central bank said.
Offshore yuan in Hong Kong traded at 6.4950 per U.S. dollar in early trade on Monday morning before sliding 0.08 per cent to 6.5192 per USA dollar. The yuan was down 0.36 per cent last week, its biggest weekly fall in three weeks.
The downward pressure still exists on China’s economy due to weak global economy and domestic structural adjustments, the central bank said, adding that it would closely watch changes in consumer prices.
If the yuan closes around the midday level, it would have weakened 0.4 percent from the week before.
Jasper Lo, the chief executive of King International Financial, said the yuan strengthened on Monday morning because the United States dollar weakened against the other currencies since Friday.
Long a catch basin for the world’s money, China started to see money trickling out at an accelerated pace after it unexpectedly devalued the yuan by nearly 2% in mid-August. A recent analysis by Macquarie Securities shows that China’s capital outflows totaled $674 billion previous year, driven by unwinding of bullish bets on the yuan by investors and companies as well as by accumulation of foreign assets by Chinese households.
China doesn’t disclose the composition of its giant cash hoard. The greenback’s recent weakness against its European and Japanese counterparts means that the euro- and yen-denominated assets in China’s reserves gained in value when translated into dollar terms.
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Pei Li contributed to this article.
