FX reserves fall slightly in July; PBoC to maintain stable CNY for some time

China’s foreign exchange reserves fell slightly at the end of July, according to the central bank data. The reserves dropped by USD 4 billion to USD 3.2 trillion, consistent with market projections. In the previous month, the reserves had rebounded, rising by USD 13.4 billion from May.

Overall, China’s FX reserves have steadied since the start of 2016 as the country enforced capital control measures. Meanwhile, in the past few months, there were solid capital inflows into EM markets. This has alleviated the depreciation pressure on the CNY as well.

The People’s Bank of China had intervened slightly into the foreign exchange market when the pair USD/CNY surpassed 6.7 in July. The currency pair has illustrated a downward trend afterwards. The Chinese authorities are expected to keep yuan stable for some time as China is hosting the G20 summit in early September, said Commerzbank in a research note.