The US dollar's relentless advance sends China's foreign exchange reserves to the lowest since 2018
REUTERS/Tingshu Wang
- Data from the People's Bank of China showed reserves fell by the equivalent of $49.2 billion to $3.0549 trillion by the end of August.
- The State Administration of Foreign Exchange attributed the decline to lower asset prices as the dollar climbs.
- The US dollar index hit a fresh 20-year high, and the yuan has lost 8% against the greenback this year.
China's foreign-currency reserves fell for the second consecutive month in August as the strength of the US dollar hammered the value of Beijing's holdings.
Data from the People's Bank of China showed reserves fell by 1.58%, or the equivalent of $49.2 billion, to $3.0549 trillion by the end of August. That's the lowest level since October 2018 and below Bloomberg estimates for a more modest dip to $3.065 trillion.
Chinese gold reserves also decreased, falling 2.13% to $1.075 trillion last month from $1.98 trillion in July.
The State Administration of Foreign Exchange attributed the decline in foreign-exchange reserves to lower asset prices as the US dollar climbs.
The greenback has been nearly unstoppable this year as the Federal Reserve's aggressive tightening campaign makes dollar assets more attractive.
The US Dollar Index has jumped 15% in 2022, hitting a fresh 20-year high and putting it on track for its biggest annual rise since 1981.
Compared to individual currencies, the dollar is up 8% versus the yuan, 13% against the euro, 15% against the British pound, and 20% against Japan's yen for the year.
China's central bank has aggressively tried to shield the yuan from further declines in recent days and on Wednesday set a strong-than-expected reference rate for the 11th consecutive day.
Meanwhile, China's trade surplus also fell to $79.4 billion in August, as export growth continues to struggle with consumers abroad cutting back on spending as inflation soars.
"China is weakening and uncertainty over their COVID situation will likely lead to more stimulus to support their economy that comes with a weaker yuan," said Edward Moya, senior market analyst at OANDA.