Tune In Tonight For Latest Read On China’s Yuan

Tune In Tonight For Latest Read On China’s Yuan

New York — With the August U.S. jobs report out of the way, it’s time to look ahead to the next big data point in global financial markets.

Currency and Treasuries traders will get a fresh read as soon as tonight on the extent of capital outflow and yuan selling that China has been grappling with.

The People’s Bank of China, which owns almost one-third of the world’s reserves, will probably report in the coming week that its war chest shrank $71 billion last month, or about 2 percent, to $3.58 trillion, according to the median estimate in a Bloomberg survey of economists.

The figures give a rough gauge of how much Treasuries the authority may have sold to defend its currency last month. Analysts from Barclays and Societe Generale forecast the reserve decline may have tallied about $122 billion and $150 billion, respectively, which would represent the biggest monthly draw-down since at least 1996.

Investors are paying more attention to China’s use of its reserves — about a third of which is in Treasuries — since the shock devaluation of the yuan on Aug. 11. To stabilize the exchange rate following its currency shift, the central bank has bought yuan and sold dollars to support the yuan and stem outflows.

That operation drains liquidity and puts a brake on economic growth.

The central bank started to report monthly reserve data in August, though there is no set schedule.

Author: Bloomberg News

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