As a result, China’s basic balance – which encompasses current account and direct investment balances and is more stable than volatile portfolio investments – recorded a deficit of US$3.2 billion, the second quarterly shortfall on record.
“Given these unfolding dynamics, which are poised to exert pressure on the RMB, we anticipate a sustained strategic response from China’s authorities,” Tommy Xie, head of Greater China Research at OCBC wrote.
Onshore yuan trading against the dollar also hit record-low volume in October, official data showed, highlighting authorities’ stepped-up efforts to curb yuan selling.
Xie expects China’s central bank to continue counter-cyclical interventions – including a strong bias in daily yuan fixings and managing yuan liquidity in the offshore market- to support the currency in the face of these headwinds.
Latest data shows that the onshore volume of yuan trading against the dollar slumped to a record low of 1.85 trillion yuan (US$254.05 billion) in October, a 73 per cent drop from the August level.
The People’s Bank of China has urged major banks to limit trading and dissuade clients to exchange the yuan for the dollar, sources have told Reuters.
In September, foreign exchange outflows from China rose sharply to US$75 billion, the biggest monthly figure since 2016, Goldman Sachs data showed.
Source: CNA
