MNI: China Nov Forex Sales Rise On Weakened Yuan Outlook

     BEIJING (MNI) - Chinese banks sold more foreign exchange to their customers

in November on yuan depreciation expectations and capital outflow pressures,

data released Monday by the State Administration of Foreign Exchange (SAFE)

show.

     Banks sold a net CNY31.2 billion worth of foreign exchange to clients in

November, compared with a net CNY50.1 billion purchase in October, SAFE said. It

was the first net sales after two consecutive months of net purchases, but it

was significantly lower than the net CNY186.1 billion purchase seen in November

2016.

     The willingness of banks' clients to purchase forex rose, while the

willingness to sell forex shrunk, as the yuan exchange rate fluctuated in a

range of 6.5730 to 6.6525 against the greenback.

     "6.60 [against the U.S. dollar] is an important threshold. We can see our

clients increase forex purchases when the yuan exchange rate rises above the

level," meaning the yuan is weakening, a forex trader in Shanghai told MNI. 

     Liu Jian, a forex analyst at Bank of Communication, told MNI that "the yuan

exchange rate showed a slight depreciation in most of the trading days for the

month, which dragged down the willingness of banks' clients to sell forex."

     Foreign-exchange purchases by bank clients accounted for 62.7% of the total

foreign-exchange expenses of banks, up 0.8 percentage point from October but

down 9.5 percentage points compared with last November, SAFE noted.

     Forex sales by bank clients comprised 61.0% of total foreign-exchange

income of banks, down from 62.9% in October, SAFE said. 

     "The banks purchased a net $15.7 billion from their clients in terms of

goods trade in November, an increase of 29% year-on-year. The banks' forex

purchases involving foreign direct investment accelerated, compared to the same

period last year," SAFE said in a statement on its website.

     Foreign-exchange purchases by individuals declined 44% in November compared

with the same period last year, remaining at their same low level of recent

years, the regulator said. 

     For the January to November period, banks sold a net CNY520.7 billion in

forex to clients, compared with CNY489.4 billion in the January-October period.

     "Banks sold net forex to their clients in forward forex transaction for

three consecutive months, indicating that capital outflow pressure is

increasing," Liu said.

     Total net forex sales by Chinese banks in November totaled CNY49.7 billion,

compared with a net purchase of CNY18.3 billion in October.

     Forex supply and demand maintained a basic balance, SAFE said.

Foreign-exchange reserves surged $10.1 billion in November to $3.12 trillion,

the 10th consecutive monthly increase, according to SAFE.

     "Cross-border capital flows and the yuan exchange rate would be pressured

slightly as the Trump government is expected to cut taxes [in the United

States], and because of some seasonal factors, including the [coming] Chinese

New Year holiday," Liu said.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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