China's Foreign Exchange Reserves Held Above $3 Trillion In April
Axi | May 08, 2017 12:25
Originally published by AxiTrader
While traders got themselves in a tizz over the slight weakness in Chinese PMI's last week the release on the weekend of the nation's foreign exchange reserves shows how conclusively Chinese authorities have locked down capital flows.
Reserves rose $21 billion last month US$3.03 trillion. That was an improvement on March's increase of $3.96 billion to US$3.009 trillion.
That's important because you'll recall that after dipping below $3 trillion in January markets were worried that Chinese flows would overall the government and actions to rein in outflows.
But back in January many analysts thought this breach of $3 trillion was the thin end of the wedge and Beijing would see a heavy and sustained drained on reserves as it fought to stop the yuan from weakening further.
The fear was this would lead to a devaluation and another market ruction like the one experienced in the wake of August 2015's 10% yuan depreciation.
So the good news is that the stability in China's reserves over recent month has also taken pressure of global markets.
But there are signs that like the USD/SGD rate the yuan might be starting to again lose a little ground to the US dollar.
That's something to watch amid this heightened sense of concern about the state of Chinese growth. But as I wrote in today's Australian dollar piece The truth is Chinese data is still relatively strong with the Citibank economic surprise index for China dropping 20 points last week but still printing a fairly solid +50. That's against Australia's +32.1 and -18.2 for the United States.
Anyway here is the USD/CNH chart showing the very mild drift higher and out of the top of the current wedge formation.
Something to watch for the future. And something important today as we wait for Chinese trade data for April to be released.
Have a great day's trading.
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