Yuan Supported By Trade Surplus, Capital Inflows: Guan Tao

China's trade surplus and foreign capital inflows are supporting the yuan despite the rising U.S. dollar index, wrote Guan Tao, chief global economist of BoC International and a former forex official in a commentary published by the Economic Daily. The China-U.S. interest spread continues to attract foreign capital with the inflows under Bond Connect and Stock Connect amounting to CNY580.6 billion in Jan-Oct, a rise of 40% y/y, said Guan. The trade surplus this year is set to break a record as it already rose 36.6% y/y to USD510.63 billion in the first ten months in favour of China, said Guan. Guan noted that a considerable part of the trade surplus has turned into corporate FX deposit holdings, and financial institutions should help them invest with FX deposits, so to avoid the risk of yuan overshooting due to concentrated FX settlement at year-end, the newspaper said.