China’s foreign Exchange Reserves fell for a fourth straight month to the lowest level since 2011, as the central bank continued to intervene currencies to prevent capital from leaving the country.
China’s foreign exchange reserves fell $28.57 billion to $3.20 trillion in February, the lowest level since December 2011, according to the data the People’s Bank of China showed on Monday.
However, the reserves fell at a slower pace last month as the Nation’s financial markets stabilized and government took more efforts to restore confidence in its currency. Foreign-exchange reserves only fell $28.57 billion in February, compared with a decline of $99.5 billion in January. The result was also less than analysts’ projection. Economists surveyed by Bloomberg had expected a decline of $40.9 billion.
“The smaller decline of foreign-exchange reserves is within market expectations as a stronger yuan helped cushion the outflow pressure,” said Zhang Fan, an economist with RHB Research.
Capital outflows from China have increased after the central bank unexpectedly devalued the currency on Aug.11 last year. Concerns about its economic slowdown and expectations of higher U.S. rates also triggered another selloff of the currency. Now the situation became better in February. China’s yuan advanced in February against the dollar after three months of declines, and a domestic stock rout eased, helped in part by a move by policy makers to reassure that they will prevent a hard landing.
“The market is gradually coming around to our view that the PBOC still has plenty of firepower to defend the currency and that the current composition of China’s capital outflows—in large part due to the deleveraging of external debt—is more benign than the bears claim,” said Julian Evans-Pritchard, an economist with Capital Economics.