China's foreign exchange reserves in March reach their highest level in seven months

BEIJING / SINGAPORE (Reuters) – China's foreign exchange reserves rose for a fifth straight month in March. The increase exceeded expectations, while growing optimism about the prospects for a trade deal between China and China eased concerns over slowing economic growth.

Chinese reserves, the largest in the world, rose nearly $ 9 billion in March, reaching $ 3,099 billion, their highest level since last August, Sunday revealed data from the central bank.

Economists polled by Reuters expected reserves to increase by $ 5 billion to $ 3.095 billion.

"The US dollar index appreciated slightly in March under the effect of China and the United States. trade negotiations, the revised political outlooks of central banks in Europe and the United States as well as the uncertainty over the Brexit … China's foreign exchange reserves have increased marginally, "said the market regulator Chinese exchange after the publication of the data.

The State Administration of Foreign Exchange Operations (SAFE) added that, as the economy is expected to maintain reasonable growth and greater flexibility in the yuan exchange rate, the country's foreign exchange reserves will remain stable.

The yuan fell 5.3% against the dollar last year, as trade relations with the United States deteriorated and the Chinese economy slowed down. But it has already rebounded by more than 2% in 2019 hoping that Washington and Beijing will reach an agreement to end their deadly trade war.

In March, the yuan lost 0.3% against the dollar due to the strength of the greenback. The dollar was up 1% against a basket of major currencies.

US and Chinese negotiators concluded their last round of trade talks on Friday and were scheduled to resume talks this week in an attempt to broker a deal that would put an end to an unequivocal tariff battle that shook world markets.

However, the outlook for the dollar is expected to remain soft after the US Federal Reserve dropped last month's forecast of further interest rate hikes this year due to signs of a US economic slowdown.

Assuming the dollar remains weak and trade talks progress, the yuan will likely maintain its recent gains and appreciate modestly over the coming year, badysts said in a new Reuters poll. It traded for the last time around 6.72 for a dollar.

US President Donald Trump said Thursday that a trade deal could be announced in the next four weeks. But the US trade office said Saturday that there is still much to do. Discussions should resume this week.

The value of China's gold reserves declined slightly from $ 79.498 billion in late February to $ 78.525 billion.

REVERSAL OF FORTUNES?

For most of last year, global investors were worried about the risk of capital flight from China as a result of the downturn in the economy, and discussed the yuan's safety margin, although Strict capital controls make it possible to control the outflows.

More recently, with the dollar in the background, attention has turned to the upward pressures that Chinese policymakers will be comfortable with while capital inflows in the country's financial markets seem set to boost the currency.

Chinese stocks rose more than 20% this year on the hope of a trade deal, while some Chinese bonds were added on April 1 to the Bloomberg Barclays Global Aggregate Index, the 39, one of the most popular fixed income benchmarks.

UBS Asset Management has estimated that this bond inclusion phase would introduce between $ 250 billion and $ 500 billion of pbadive money, or even trillions of dollars, if active money was to be counted.

Perhaps the trend is also turning for the Chinese economy: Business surveys show that March's manufacturing activity has returned to growth, suggesting that government stimulus packages are beginning to emerge. already take shape.

If maintained, improved economic data could lead markets to reduce expectations of policy easing, although badysts are still expecting several more cuts in bank reserve requirements this year, perhaps as early as next week.