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--10th Straight Monthly Gain
--Biggest Monthly Gain Since October 2016
BEIJING (MNI) - China's foreign-exchange reserves increased for the 10th
straight month in November, due largely to a positive valuation effect caused by
the weak performance of the U.S dollar during the month.
Foreign-exchange reserves increased $10.06 billion during the month to
$3.119 trillion, the biggest gain since last October and significantly higher
than the $703 million rise in October, according to data from the People's Bank
"Major non-dollar currencies appreciated, which resulted in changes of
relevant assets prices, which was the main reason for the increase" in reserves,
the State Administration of Foreign Exchange (SAFE) explained in a statement.
The U.S. dollar index fell 1.64% in November, the biggest drop since July,
while the yuan rose 0.25% against the greenback during the month.
Liu Jian, foreign exchange analyst with the Bank of Communications, told
MNI that the "valuation effect contributed about CNY14 billion to forex reserves
growth this month. What is more, the rise of the U.S stock market also supported
Cross-border capital flows and transactions were more stable and balanced
in November, SAFE said.
The stable momentum of international payments ensured the consecutive
[monthly] growth of the foreign exchange reserves in a fundamental way, SAFE
"The slight pickup of U.S government bond yields had a negative impact on
the investment turnover of foreign exchange reserves," a Beijing-based forex
trader at a commercial bank told MNI.
However, the size of reserves increases will decelerate as the valuation
"The U.S dollar has been boosted by the tax cut progress of the Trump
government. In addition, the Federal Reserve will hike rates again, so the euro
and sterling will fall," Communication Bank's Liu said. "The yields on U.S
government bonds will pick up due to tax reform, which will also put [downward]
pressure on foreign exchange reserves growth."
As reform of Chinese exchange rate and interest rate markets is deepened,
market expectations will improve further, so that international payments will
continue to be balanced and help the foreign exchange reserve situation remain
stable in the future, SAFE said.
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