PBOC Forex Position Down Slightly In August

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

of China fell slightly in August, suggesting the PBOC rarely interfered in the

process of the yuan's rapid appreciation during the month.

     The PBOC's foreign-exchange position fell CNY821 million to CNY21.51

trillion in August, the 22th straight monthly drop, compared with a decrease of

CNY34.315 billion in July, according to data from the PBOC released on Friday.

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

flows. The larger the decline, the larger capital outflows are seen to be.

     "The rapid appreciation of the yuan is mainly caused by supply and demand,

not by the operations of the PBOC. The aim of the PBOC to make the exchange rate

move with market forces is very clear," Xie Yaxuan and Yan Ling, analysts at

China Merchant Securities, said on Friday. "If the PBOC does not intervene, the

forex purchase position will not rise significantly."

     The yuan strengthened against the dollar significantly in August, rising

from 6.7290 at the close on July 31 to 6.5969 on Aug. 31.

     Meanwhile, foreign-exchange reserves rose $10.81 billion to $3.092 trillion

in August, the seventh straight increase.

     The yuan has strengthened further in September, and last traded at 6.5400

on Friday.

     "In the short-term, the appreciation expectations for the yuan might

continue," said Liu Jian, a senior analyst at Bank of Communication Financial

Research Center. "Capital flows will be likely to improve, and the forex

position might turn positive in the near future."

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

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