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Free AccessChina Banks Are Net FX Buyers In Sept For 1st Time In 2+ Years
BEIJING (MNI) - Chinese banks bought more foreign exchange from their
clients in September than they sold, providing fresh evidence of more capital
inflows for the month as the yuan exchange rate showed greater two-way movement
and capital outflow controls continued to have their intended effect.
The State Administration of Foreign Exchange said Thursday that Chinese
banks bought a net CNY21.8 billion from clients in September, compared with the
net sale of CNY27.6 billion in August. It was the first time banks were net
purchasers from clients since June 2015.
This number, along with the forex purchase position number released by the
People's Bank of China this morning, is treated as a key indicator of the level
of capital flows into and out of the country. The bigger the purchase number,
the greater the inflows.
The PBOC said banks' forex purchase position rose CNY850 million to
CNY21.511 trillion, the first monthly growth since 2015.
"The net purchase indicates that clients' demand to hold foreign exchange
declined as the yuan's appreciation accelerated in the early part of September,"
Li Liuyang, a foreign-exchange analyst with China Merchants Bank, told MNI.
Including banks' proprietary trading, their net purchases stood at CNY1.9
billion in September, compared with August's net sale of CNY25.6 billion.
For the first three quarters, total forex sales of banks fell 54% to $112.9
billion, according to SAFE, which added that forex sales involving foreign
payments of clients dropped 56% to $111.5 billion.
SAFE said that the forex sales ratio of banks' clients, measuring clients'
forex sales as a proportion of their forex incomes, was 63% in the
January-September period, up two percentage points compared with the same period
last year, while the forex purchase ratio of the clients was 66%, down eight
percentage points compared with the first three quarters of 2016.
Banks' forex sales of currency forward contracts to clients stood at a net
$7.7 billion, compared with a net purchase of $58.1 billion in the same period
last year, an indication that yuan depreciation expectations are fading, SAFE
said.
The regulator said in a separate statement that "demand and supply in the
forex market is seeing a basic balance, pushing up the rise of foreign
reserves."
As of the end of September, outstanding foreign reserves stood at $3.11
trillion, an increase of $98 billion from the end of 2016, SAFE said.
Liu Jian, a forex analyst at Bank of Communication, told MNI: "Both the
forex purchase and sales ratios rose in September, showing that forex market
participants were confused about the changes to the yuan exchange rate for the
month."
The Chinese yuan fluctuated sharply in September, rising to as strong as
6.4350 against the U.S. dollar and dropping to as weak as 6.6842. It ended the
month with a total decline of 0.76%.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: MMQPB$,M$A$$$,M$Q$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.