PBOC Forex Position Posts First Rise in September Since 2015

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

of China rose in September for the first time since October 2015, reflecting

limited intervention by the PBOC in the natural flow of forex supply and demand.

     The PBOC's foreign-exchange position rose CNY850 million to CNY21.511

trillion in September, compared with a decrease of CNY821 million in August,

according to data from the PBOC released on Thursday.

     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. 

     "In September, the yuan first appreciated then depreciated. The

appreciation in early September increased the demands for yuan and attracted

capital inflows, while the yuan depreciation afterward made investors more

willing to wait and see the trend of the yuan," Liu Jian, a senior analyst at

Bank of Communications, said on Thursday. "But as the expectations on the yuan

diverged and the two-way fluctuations became larger, the depreciation did not

lead to a significant increase of yuan selling."

     The exchange rate of the yuan strengthened from 6.5969 on Aug. 31 to 6.4617

on Sept. 8, and then weakened to 6.6470 by Sept. 29.

     The slight rise in September's forex position also suggested the PBOC

intervened very little in the market.

     "The demand and supply of foreign exchange in September were quite

balanced," a Shanghai-based foreign-exchange trader at a commercial bank told

MNI. "The PBOC's intervention in the market has become much less than before."

     Foreign-exchange reserves rose $16.98 billion to $3.109 trillion in

September, the eighth straight increase.

     Analysts expected that the foreign-exchange purchase position will remain

stable in the near future.

     "The yuan exchange rate remained generally stable in October, and the PBOC

has basically quit its role of intervening in the foreign-exchange market

frequently," Liu said. "Also, considering that seasonal foreign-exchange demands

will be lower, cross-border capital flows will remain balanced overall," Liu

said. "The possibility that the PBOC's foreign-exchange position will go up or

down dramatically is very low."

--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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