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China's forex reserve drop narrows in 2016, pressure remains

China's forex reserve drop narrows in 2016, pressure remains

The falling yuan has raised concern among Chinese policymakers of capital outflows, and on Saturday the government had reported that foreign exchange reserves fell to near six-year lows by the end of December.

China's central bank has altered its yuan fixing mechanism since the USA presidential election in favor of a stronger currency as capital outflows mounted and President-elect Donald Trump threatens to adopt protectionist trade policies, according to Goldman Sachs Group Inc. That figure is but a fraction of China's foreign exchange reserves.

The shift allows the central bank to let the yuan rise more than it used to when the dollar weakened and let it fall less in a broad USA currency rally, reversing the pattern before the election, Goldman Sachs's model showed.

The People's Bank of China set the reference rate of the yuan - also known as the renminbi - at 6.9262 to the dollar, down 0.87 percent from Friday's fixing, according to data from the Foreign Exchange Trade System.

That 12-month consensus view is the weakest in several years of Reuters polls and, if reached, would mark the lowest level for the closely managed yuan in almost a decade.

S.London road passes ANNUAL air pollution level in five days
They must include a national network of clean air zones, which stop the dirtiest diesel vehicles entering pollution hotspots. But ClientEarth lawyer Alan Andrews warned that Londoners could not wait three years and that immediate action was needed.

That has left Chinese eager to get money out of the country, creating what some researchers describe as a potentially destructive negative feedback loop, where fears of further yuan falls spur outflows that pile fresh pressure on the currency.

Leading the losses will likely be the Chinese yuan, which slumped around 6.6 percent in 2016 and was one of the main reasons for financial market volatility, despite Beijing supporting it by burning through reserves to offset the impact of outflows. Despite market expectations of further strengthening of the USA dollar, it can not be ruled out that the dollar will decline. In the long term, the high valuation of the United States dollar is expected to keep additional gains restricted.

Following the much-publicized meetings between China's central bank and the country's major bitcoin exchanges, the head of BTCC has claimed that it'll be a few years yet before the bitcoin is regulated in the country.

"Although the offshore yuan moves have put traders on edge, the global impact is not in the same league as the turmoil created past year", added Innes.


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