21 Nov 2013
PBOC no longer sees benefits to increase FX reserves
FXstreet.com (Barcelona) - The People’s Bank of China has given a hint to the market about its re-think on increasing its foreign currency reserves of more than $3.7 trillion from $3.5 trillion in late June, saying they no longer see any benefits.
According to Yi Gang, Deputy Governor with the People’s Bank of China, being cited by Bloomberg in a speech to China's Economists 50 Forum at Tsinghua University yesterday: “It’s no longer in China’s favor to accumulate foreign-exchange reserves; the marginal cost of accumulating foreign-exchange reserves has exceeded the marginal gains.”
With regards to the controversial issue of Yuan's appreciation, Yi said that a stronger Chinese currency provides more benefits than damage, a line that may communicate China not being as active in its interventionist role as in the past. However, that remains to be seen, as speculative flows entering the Yuan should continue forcing the Chinese government to intervene more often that they might want to. The news come as the PBOC vowed to widen Yuan trading band earlier on the week.
According to Yi Gang, Deputy Governor with the People’s Bank of China, being cited by Bloomberg in a speech to China's Economists 50 Forum at Tsinghua University yesterday: “It’s no longer in China’s favor to accumulate foreign-exchange reserves; the marginal cost of accumulating foreign-exchange reserves has exceeded the marginal gains.”
With regards to the controversial issue of Yuan's appreciation, Yi said that a stronger Chinese currency provides more benefits than damage, a line that may communicate China not being as active in its interventionist role as in the past. However, that remains to be seen, as speculative flows entering the Yuan should continue forcing the Chinese government to intervene more often that they might want to. The news come as the PBOC vowed to widen Yuan trading band earlier on the week.