PBoC’s intervention stabilized market

CNY has now surpassed the JPY to become the fourth most used currency after the USD, EUR and GBP, according to SWIFT. The move represents a step forward in Beijing's aim to make CNY a dominant global currency. The rising influence of CNY is in line with its economic power. However, it also calls for further openness in China's financial market and more transparency and consistency in China's policy. 

China's foreign reserves decreased for the fifth straight month, falling by USD43.3bn in September, compared with a drop of USD93.9bn in the prior month. The decline in China's foreign reserves, while less than market expected, still shows that China's central bank continued the market intervention in the past month, says Commerzbank. 

The regulation tightening in onshore market could have reduced USD purchase flows. As PBoC also intervened in the forward market in the past month, the foreign reserves will likely plunge again when these forward contracts mature.

In addition, Chinese residents will likely purchase large amounts of foreign currency in October to repay the credit card bills, as overseas travellers hit a new record during the October golden week holidays. The market has stabilized somewhat after PBoC's intensive intervention, and USD-CNH declined to 6.35 recently, notes Commerzbank.