A preview of the foreign currency reserves information due from China today, Tuesday 7 August 2018
There is no scheduled time for the releases, it usually (given past experience) comes in the afternoon (China time), Europe morning
- expected $3.107bn, prior $3.11bn (and change)
I usually pretty much ignore this data point, unless there is some concern over the currency and potential capital outflows …. which is what is happening again right now. So, yeah, its time to begin paying attention to this data point again. Banks are on the lookout to indications of intervention by the PBoC:
Barclays:
- We expect China FX reserves data to suggest FX intervention by the PBoC in July, when we saw rapid CNY weakness; higher-than-expected reserves could spark worries of PBoC inaction.
Nomura:
- Our FX strategists believe headline FX reserves will fall by USD1.4bn to USD3110.8bn in July. After adjusting for FX and coupon effects, we estimate the adjusted change to fall by USD5.0bn, from an increase of USD3.6bn in June.
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I've been on the 'CNY devaluation is a policy move' bandwagon. Not everyone agrees but I am not moving from it just yet. PBoC intervention in support of the yuan will be aimed at slowing the fall (the do not want it plummeting!) IMO. While trade tension ratchet higher I expect the devaluation to continue, amongst other measures. The PBoC have made shorting yuan a bit more expensive (moves last Friday, here) but its little more than a token at this stage. I will be back with more on this separately.
