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     BEIJING (MNI) - China banks were net purchasers of foreign exchange from
clients in May, reflecting relatively balanced cross-border capital flows,
according to data from the State Administration of Foreign Exchange.
     Chinese banks bought a net CNY143.3 billion from clients in May, the
highest since March 2014, compared with net purchase of CNY92.4 billion in
April, SAFE noted on Tuesday.
     As of end May, outstanding foreign reserves stood at $3.11 trillion, a
decrease of $14.23 billion from April, according to data from the People's Bank
of China.
     The new forex forwards signed by customers this month to buy yuan from
banks in the future amounted to CNY179.7 billion - CNY10.6 billion higher than
forward sales, reflecting increased confidence in the yuan.
     The outstanding amount of forex forwards to sell yuan to banks fell to
CNY593.8 billion in May from CNY605 billion in April.
     ***Comment: The figure suggested the yuan didn't face much depreciation
pressures in May. Surging dollar index recently has weakened the yuan, which
fell to 6.4675 versus dollar at 16:00 on Tuesday. There is relatively few
reasons for the PBOC to intervene and weaker yuan might be of the PBOC's
interest as the CFETS yuan index was at 97.85 last Friday, which was quite
strong. Weaker yuan will also help alleviate bond market's pressure, and keeping
bond yields at a relatively low level to lower funding cost is more crucial for
China economy growth at present. However, if the dollar index rises too quickly,
which causes yuan to weaken too rapidly, the possibility for the PBOC to
intervene will become higher.
--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: MMQPB$,M$A$$$,M$Q$$$,MT$$$$]

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