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Iris Pang, economist at ING, points out that as per the latest figure from the Chinese central bank data, country’s foreign exchange reserves fell by $3.81 billion or 0.12% in April to $3.095 trillion.

Key Quotes

“The small drop was mainly driven by the strong dollar that rose 1.17% in the month. The strong dollar has put a lower valuation on non-dollar assets in dollar terms.”

“From the foreign exchange reserves data, it seems there were net outflows from China, but as we’ve explained, this was masked by the strong dollar.”

“There were inflows into China’s bond market and the stock market in April. For example, offshore institutions increased their holdings in China bonds by CNY 76.25 billion in the month – an increase of 4% on a monthly basis according to Bond Connect.”

“If the trade war escalates, we expect the yuan to remain fairly stable.”