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China's Foreign Reserves Rise to $3.105 Trillion on Weaker Dollar

China's Foreign Reserves Rise to $3.105 Trillion on Weaker Dollar
(Dollar Photo Club)

Thursday, 07 November 2019 08:29 AM

China's foreign exchange reserves rose more than expected in October, as the yuan rebounded on growing hopes that Chinese and U.S. negotiators are making headway in their efforts to strike an interim trade agreement.

The country's foreign exchange reserves - the world's largest - rose $12.7 billion in October to $3.105 trillion, central bank data showed on Thursday.

Economists polled by Reuters had expected reserves would rise by $7.6 billion from September to $3.1 trillion.

The increase in October reserves was due to changes in global exchange rates, including a fall in the dollar, and asset prices, the foreign exchange regulator said in a statement.

China will be able to keep its foreign exchange reserves generally steady, the regulator said.

China has been able to keep capital outflows under control over the past year despite an escalating trade war with the United States and weakening economic growth.

Reserves have rebounded from an October 2018 low thanks to capital controls and rising foreign investments in Chinese stocks and bonds.

In October, the yuan rose 1.53% against the dollar.

The yuan rose past the key 7 per dollar level on Thursday afternoon, after the commerce ministry said both Beijing and Washington had agreed to cancel the additional tariffs imposed during their months-long trade war in different phases.

But the yuan is still down about 10% against the dollar since the two sides began imposing tit-for-tat tariffs in April last year.

The dollar fell 2.04% in October against a basket of other major currencies.

China's gross domestic product growth slowed more than expected to 6.0% year-on-year in the third quarter, its weakest pace in almost three decades.

For the whole of 2019, GDP growth is expected to cool to 6.2% and then hit 5.9% in 2020, according to a Reuters poll, underlining the growing challenges faced by Beijing in its efforts to stabilize the economy.

China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a "phase one" U.S.-China trade deal, people familiar with the negotiations said.

Chinese policymakers are walking a tight rope between easing policy to propping-up growth and ensuring monetary conditions aren't too loose lest it pushes up already-high debt levels.

Last month, China's central bank unexpectedly kept unchanged its new benchmark lending rate after reductions in August and September. But on Tuesday, it cut the interest rate on its medium-term lending facility (MLF) for the first time since early 2016 in a nod to the underlying economic pressures.

China burned through $1 trillion of reserves supporting the yuan in the last economic downturn in 2015, which also saw it devalue the currency in a shock move that spread turmoil in global financial markets.

Meanwhile, the central bank's holdings of gold held steady against the previous month although it has been steadily ramping up its gold reserves this year.

It held 62.64 million fine troy ounces of gold at the end of October, up from 59.56 million ounces at the end of 2018.

The value of China's gold reserves rose to $94.65 billion at the end of October from $93.045 billion at the end of September.

© 2019 Thomson/Reuters. All rights reserved.

   
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China's foreign exchange reserves rose more than expected in October, as the yuan rebounded on growing hopes that Chinese and U.S. negotiators are making headway in their efforts to strike an interim trade agreement.
china, foreign, reserves, weaker, dollar
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2019-29-07
Thursday, 07 November 2019 08:29 AM
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