Foreign Currency Regulator Show No Signs of Concern on Foreign Exchange Outflows
The country’s foreign currency regulator is showing no concern of the signs of foreign exchange outflows as the economy is still showing signs of slowing down. The foreign exchange regulator stated that a recent decline in forex reserves is definitely in par with the policy goals in China.
The country is closely monitoring any impact of the changes that will happen in the U.S. monetary policy even in the signs of a greater volatility in cross border flows. Furthermore capital inflows are going unto outflows because of the recent two way fluctuations in the yuan exchange rate that is paired with a complex external and internal environment that analysts say is only normal as such capital outflow is not that risky.
The Chinese foreign exchange reserves is one of the world largest fell by US$100 billion in the third quarter, in which some analysts attributed the decline which suggested hot money outflows that came from China amid the increase in market jitters on whether the second largest economy in the world is at risk of another slowdown. The decline in the reserves is due to the recent rise against the U.S. dollars against all other major currencies that reduces the dollar value of the proportion of the reserves that was held by other currencies.
The central bank is slowly exiting from regularly intervening in the foreign exchange market and officials are pledging to create rebalance trade that will help slow down the build up of any foreign exchange reserves that would complicate monetary policies and stroke inflation in the long term.