China’s forex reserves end two months’ rise, hitting lowest level since December 2011
Reserves fall US$27.9 billion to US$3.19 trillion in May, central bank data shows, in a bigger drop than expected
China’s foreign exchange reserves ended a two-month rise in May, hitting their lowest level since December 2011 amid a weakening yuan and as speculation mounted over a rate rise by the US Federal Reserve.
Forex reserves fell US$27.9 billion to US$3.19 trillion last month, according to data released by the People’s Bank of China (PBOC) on Tuesday.
The decline – larger than expected – came after the reserves posted gains in March and April, but the drop was smaller than the US$28.6 billion seen in February.
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The yuan has been under weakening pressure against the US dollar since last month amid expectations the Fed would raise rates following an increase in December.
The US dollar index, which measures the greenback against six other major currencies, strengthened by 3 per cent last month. The firmer greenback led the yuan to weaken 1.5 per cent, the PBOC said in a statement earlier on Tuesday.
In addition, uncertainty surrounding a referendum in Britain on June 23 over whether it should remain in the European Union has also helped to lift the greenback, adding volatility to the global market.
Xie Yaxuan, chief economist at China Merchants Securities, said the dollar might remain strong this month and into July, which might further weaken the yuan.