China’s FX reserves are likely to have increased in March, first time in five months, according to Societe Generale. The weak US dollar, supported by latest dovish tone of the Fed, is expected to have increased the reserves value by around USD 40 billion. Moreover, the accommodative global sentiment markedly alleviated depreciation pressure on China’s yuan. Therefore, the yuan depreciated against a basket of other currencies in March, but did not fall against the US dollar, noted Societe Generale.
“We expect China’s official FX reserves to increase to $3,250bn at end-March from $3,202bn at end-February”, added Societe Generale.
Stringent capital controls in certain areas, along with stability of USD/CNY, should have assisted in containing capital outflows and permitted the People’s Bank of China to considerably reduce its currency interventions since end of February.
