Net foreign exchange sales by the People’s Bank of China in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Britain’s decision to leave the European Union.
China’s central bank sold a net 97.7bn yuan ($14.6bn) in foreign exchange in June, up 82% from May’s 53.7bn yuan, according to Reuters calculations based on central bank data released yesterday.
The data showed that capital flight was largely under control, even as the yuan repeatedly broke through 5-1/2 year lows, and outflows were spurred by anxiety over Brexit.
The central bank’s net foreign exchange sales hit a record high of 708.2bn yuan in December.
“This is related to financial market volatility caused by Britain’s referendum to leave the European Union,” the Shanghai Securities News quoted Sheng Songcheng, director of the Survey and Statistics Department at the PBOC, as saying.
The central bank “provided small amounts of foreign exchange liquidity in order to stabilise market expectations”, Sheng said, without elaborating.
The central bank has reported a surprise increase in June foreign exchange reserves, but analysts said they could fall again in coming months if the weakening yuan triggers more capital outflows.
The rise of $13.4bn in foreign exchange reserves in June was due to stronger prices of assets in which China has invested its reserves, as well as appreciation of some non-dollar currencies, Sheng said.