Bloomberg (gated) report using data for April from China's State Administration of Foreign Exchange released on Friday:
- Local firms purchased the largest amount of foreign exchange from banks since 2016 in April
- exporters held back dollar conversion
- residents snapped up foreign currencies for overseas travel
The concern driving flows is a weaker yuan given China’s low interest rate compared with that for the US dollar.
More from Bloomberg:
Goldman Sachs:
- “We expect policymakers to maintain tight control to fend off depreciation expectations” via a strong yuan fixing and offshore liquidity management, given the elevated capital outflow pressures
Hang Seng Bank China:
- “Exporters have a higher tendency to hold foreign currency instead of yuan, given the weak expectation of China’s economic growth and continuous capital outflow,”
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The fear over a weaker yuan is restraining the People's Bank of China from rate cuts. Only today we had this:
