China's August forex reserves fall to lowest levels since 2011, likely to remain on a downward path through 2016

According to data released by the People's Bank of China (PBoC), China's foreign exchange reserves fell to $3.185 trillion in August, the lowest level since December 2011. Reserves stood at $3.20 trillion at the end of July, central bank data showed on Wednesday.

China's gold reserves fell to $77.18 billion at the end of August, down from $78.89 billion at end-July, data on the People's Bank of China website showed.

The PBoB has stepped in via state-run banks since mid-July to slow the pace of depreciation in the yuan, which has weakened 2.6 percent against the U.S. dollar so far this year. Rising Fed hike bets this year are likely to keep the US dollar supported, adding to pressure on the yuan and consequently the reserves.

"With a Fed rate hike likely before the end of the year, the authorities will have their hands full with containing any wild spikes in USDCNY triggered by capital outflows, and can expect FX reserves to remain on a downward path through to the end of the year." said Nie Wen, an economist at Hwabao Trust in Shanghai.