How to treat foreign reserves approaching $3 trillion

Dollar foreign decline arbitrage funds

shangzheng· 2017-01-09 09:47:42

" on the morning of 7 central bank released the latest data show that in December 2016 the scale of foreign exchange reserves, China's foreign exchange reserves of $3 trillion and 10 billion 517 million, compared with a decrease of $41 billion 81 million at the end of November.

chain, in December last year, the scale of foreign exchange reserves declined slightly compared with the month of November. From the annual data, in 2016 the annual decline in the size of the reserves of $319 billion 844 million, a decline of 9.6%, compared with the same period last year dropped $192 billion 812 million.

due to foreign exchange reserve currency composition diversification, denominated in dollars will be affected by the influence of exchange rate fluctuations. According to Xie Yaxuan, chief macroeconomic analyst at China Merchants Securities estimates, in December last year, the impact of exchange rate conversion factor was negative growth of $8 billion 900 million. If the deduction of the factors, the central bank's official foreign exchange reserves fell $32 billion 200 million.

generally, factors affecting the variation of foreign exchange reserves including: the central bank in the foreign exchange market operation; price fluctuation of investment assets of foreign exchange reserves; because of the dollar as the reserve currency, other currencies relative to the dollar exchange rate changes may lead to changes in the size of foreign exchange reserves. In addition, according to the International Monetary Fund on foreign exchange reserves, foreign exchange reserve funds in support of the "going out" and other aspects of accounting from the scale of foreign exchange reserve in adjustment to the scale, and vice versa.

in December last year foreign exchange reserves decline, the State Administration of foreign exchange is responsible for that, is the result of the central bank to provide foreign exchange funds to the market to regulate the supply and demand of foreign exchange balance, the comprehensive effect of non dollar currencies against the dollar devaluation of multiple factors such as overall.

as for the situation in 2016, the official pointed out that the central bank to stabilize the RMB exchange rate is the main reason for the decline in the size of foreign exchange reserves. Valuation, the U.S. dollar against the U.S. dollar currency devaluation and asset price changes also have an impact on the size of foreign exchange reserves.

in November last year, as Trump was elected president of the United States, the dollar index has experienced a round up, rose about 3.8% a month. In December last year, the dollar index peaked, rose about 0.8% a month. Corresponding to this, the RMB against the U.S. dollar fell 0.9%.

Xie Yaxuan believes that the market is expected to become more rational for the ruling of the Chinese government, the RMB against the U.S. dollar in the magnitude of the slowdown in the. Recently, the U.S. dollar spot exchange rate continued to rise in the renminbi, the market activity increased, indicating that the transaction is fierce game.

2017 since January 4th, offshore renminbi has experienced a sharp rise in the dollar exchange rate by about 6.98 at the lowest rose to 6.78. Behind this, is Hongkong's offshore RMB lending rate (Hibor) increases, such as the January 4th overnight funds rate reached 16.95%, for a period of 1 weeks of funds also rose to about 15%, which is short of capital cost.

since the 8· 11, after the exchange, Hongkong offshore RMB deposit stock began to fall, down from August 2015's $979 billion to $627 billion 600 million in November 2016, a decline of more than 30%. Xie Yaxuan pointed out that the offshore RMB liquidity pool becomes shallow, a wind sways grass is likely to trigger the offshore renminbi market lending rates costs rise rapidly, when arbitrage funds began to exit or reverse operation, offshore market exchange rate volatility easily.

after the central bank announced the latest foreign exchange reserve data, the market there is the risk of foreign reserves to keep $3 trillion mark comments, we can see whether the stock market or foreign exchange market has a strong integer point plot". In this regard, the foreign exchange bureau official said, the market should pay more attention to foreign exchange reserves can continue to provide liquidity to the market, the ability to withstand external shocks, rather than a specific point. At present, $3 trillion of foreign exchange reserves are abundant, in a reasonable range of stability. It is not to say that once the foreign exchange reserves fall below $3 trillion, the crisis will come. "

on the long-term trend of the RMB exchange rate, Founder Securities chief macroeconomic analyst Ren Zeping pointed out that the RMB to stabilize property tax cuts, the need to accelerate the pace of reform and the supply side, improve the total factor productivity.

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How to treat foreign reserves approaching $3 trillion