China’s central bank sold a net $46.1 billion worth of foreign exchange in December, as the authorities continued to support the sliding yuan in the face of a rising dollar and slowing economic growth.
Net foreign exchange sales by the People’s Bank of China (PBOC) amounted to 317.8 billion yuan ($46.1 billion), according to Reuters calculations based on central bank data released on its website on Monday.
That compared with net sales of 382.7 billion yuan in November and 708.2 billion in December 2015. Earlier data showed China’s December foreign exchange reserves fell for a sixth straight month to $3.011 trillion, the lowest level in nearly six years.
The yuan fell around 6.6 percent against the dollar in 2016, the most since 1994, forcing the authorities to tighten outbound investment as they scrambled to staunch capital outflows. The central bank is widely believed to have sold US dollars to cushion the descent of the yuan in recent months, even as a slew of economic data has provided more evidence that the economy is stabilising.
The yuan has strengthened somewhat since the start of 2017 after an abrupt tightening of yuan liquidity in Hong Kong, which traders believe was orchestrated by Chinese authorities to squeeze investors shorting the yuan.
China’s yuan firmed against the dollar on Monday as the greenback softened in global markets, with traders nervously awaiting US President-elect Donald Trump’s first days in office. Analysts expect yuan weakness to continue, and some Chinese government-backed researchers have started calling for the PBOC to stop intervening in the foreign exchange market, devalue the yuan and let it float freely, which will help stabilize the exchange rate and preserve China’s dwindling foreign reserves.

Source: Arab News