MNI: PBOC Forex Position Rises Slightly In October

     BEIJING (MNI) - The foreign-exchange purchase position of the People's Bank

of China edged up in October for the second straight month, reflecting a

balanced flow of forex supply and demand.

     The PBOC's foreign-exchange position rose CNY2.098 billion to CNY22.22

trillion in October, compared with the CNY850 million increase in September,

according to data from the PBOC released on Tuesday.

     The forex purchase position is viewed as an indicator of Chinese capital

flows. The larger the increase, the larger capital inflows are seen to be, while

the reverse is also true. 

     The small increase in October was in line with the October increase of

CNY703 million in foreign reserves.

     "The forex purchase position number is within our expectations," a

Shanghai-based forex trader at a commercial bank told MNI. "It suggests very

balanced supply and demand for the yuan." 

     The exchange rate of the yuan strengthened from 6.6470 against the U.S.

dollar on Sept. 29 to 6.5868 on Oct. 13, and then weakened to 6.6272 by Oct. 31.

     Analysts expected that the foreign-exchange purchase position will remain

stable in the near future.

     "In the short-term, the yuan will fluctuate in a narrow range and the

market has not formed a one-sided expectation for yuan movement," said Liu Jian,

a senior analyst at Bank of Communications. "So the change of the PBOC's forex

purchase position might fluctuate around zero, and the possibility for it to

change on a large scale is slight."

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

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

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