IndianMascot
Core Member
Beijing was embroiled in a spate of frenzied dollar-selling last month as capital outflows and a depreciating yuan saw foreign-exchange reserves tumble by $80 billion, resuming 2015’s sharp declines in the country’s monetary war chest after a period of relative stability between February and September this year.
That’s the prediction of analysts Khoon Goh of Australia & New Zealand Banking Group Ltd, and Jens Nordvig of Exante Data LLC, a data-driven macro research firm, who reckon markets have underestimated the likely scale of currency intervention by the People’s Bank of China in light of the fall of the yuan relative to the dollar.
Estimating the drop at $80 billion, they reckon Chinese currency reserves fell in October by more than four times the decline registered in the previous month. Their projection is in stark contrast to the median forecast of economists surveyed by Bloomberg, who expect a decline of $26 billion when the People’s Bank of China releases the data on 7 November.
“China’s FX reserves for October is likely to post a much bigger decline than what the market is expecting,” Goh, head of Asia research at ANZ, wrote in a note on Thursday. “The drawdown in reserves in the month will be driven by FX intervention, negative currency valuation effects, and capital loss on fixed income investments,” Goh concludes.
Livemint