BEIJING – China's foreign-exchange reserves rose for a sixth straight month in July, underscoring Beijing's success in keeping money from moving offshore with some help from a weaker U.S. dollar.
Continue Reading Below
Reserves rose $23.93 billion from the previous month to $3.081 trillion, the highest level in nine months, according to figures from the People's Bank of China released Monday. July's increase is bigger than economists' median forecast of a $15 billion gain and was the sixth month in a row of increases, the longest stretch in three years.
Some economists said the string of increases is changing expectations in the market about where the PBOC is taking the yuan. "Looks like now the reserves will stay steady and show modest gains for the rest of the year, " said Liu Xuezhi, an economist at Bank of Communications.
The U.S. dollar index, which tracks the dollar against a basket of major currencies, declined 3% last month, while the dollar dropped 0.75% against the yuan on China's onshore market in July.
Foreign-exchange rate changes boosted China's reserves by some $24 billion to $30.6 billion in July, according to estimates of economists. Factoring in China's usual trade surplus, economists' estimate that some $18 billion to $27 billion of money left the country last month.
Since persisting weakness in the yuan caused a gush of outflows and a plummet in reserves starting two years ago, the central bank has been battling to turn the tide. It has tightened scrutiny of companies and individuals moving money out of the country and introduced a new "countercyclical" factor to confound market expectations in determining the yuan's exchange rate.
Continue Reading Below
With the steady yuan exchange rate, purchases of foreign exchange by households and companies have become more rational, the State Administration of Foreign Exchange said in a statement Monday accompanying the reserves data.
China's Finance Ministry last week unveiled new measures to better scrutinize overseas investment made by state-owned companies. In addition, starting September, banks are required to report all overseas cash withdrawals and card transactions exceeding 1,000 yuan ($149) to the foreign-exchange regulator on a daily basis.
Renewed tensions between Beijing and Washington over trade imbalances mean uncertainties remain for the yuan exchange rate, said Mr. Liu, the economist. In the near term, controls on capital outflows will likely remain, Citigroup economists said in a note.
(END) Dow Jones Newswires
August 07, 2017 08:47 ET (12:47 GMT)