China’s central bank winning its numbers game over currency
Foreign exchange reserves forecast to rise again as analysts highlight success in hitting targets for yuan
China is expected to announce another monthly rise in its foreign exchange reserves on Thursday in the latest sign that the country’s central bank has won the battle to curb the country’s capital exodus and defend the exchange rate of the yuan.
Economists said the continued rise in the yuan marked a complete change in sentiment regarding the currency and some predicted that the bank may loosen currency controls.
Two key numbers highlight the People’s Bank of China’s goals: the number seven, referring to the exchange rate between dollar and the yuan, and the number three – namely the US$3 trillion line in China’s reserves.
Late last year and early this year both looked like big tests as the yuan traded at a level of 6.95 last Christmas and the foreign exchange reserves briefly dipped below US$3 trillion at the end of January.
On Wednesday, the yuan had strengthened against the greenback to 6.53, helped by a weakening dollar.
Among all 25 economists surveyed by Bloomberg, all of them expected that China’s reserves at the end of August would be above US$3 trillion and only five of them expected a slight fall from the end of July.