China Feb forex reserves rebound above S$4 trillion, first rise in 8 months

A sign for foreign currency exchange is seen at a branch of the ICBC bank in Beijing, China on Jan 3, 2017.
A sign for foreign currency exchange is seen at a branch of the ICBC bank in Beijing, China on Jan 3, 2017.PHOTO: REUTERS

BEIJING (REUTERS) - China's foreign exchange reserves unexpectedly rose for the first time in eight months in February, rebounding above US$3 trillion (S$4.23 trillion) as a regulatory crackdown and weakness in the dollar helped staunch capital outflows.

Reserves rose US$6.92 billion during February to total US$3.005 trillion, their first increase since June 2016, compared with a drop of US$12.3 billion in January, when reserves fell to US$2.998 trillion.

Economists polled by Reuters had expected forex reserves to drop by US$25 billion to US$2.973 trillion in February.

China has tightened rules on moving capital outside the country in recent months as it seeks to support the yuan currency and stem a slide in its foreign exchange reserves.

It burned through nearly US$320 billion of reserves last year but the yuan still fell 6.6 per cent against the dollar, its biggest annual drop since 1994.

The yuan has steadied in recent weeks as the dollar's rally lost steam. The Chinese currency gained 0.2 per cent in February, and is up 0.8 per cent so far in 2017.

However, expectations of US interest rate hikes beginning as early as next week have rekindled fears that the yuan could come under renewed pressure. The prospect of the yuan depreciating could inflame trade tensions with the US President Donald Trump's administration.

China's gold reserves rose to US$74.376 billion at the end of February, from US$71.292 billion at end-January, data published on the People's Bank of China website showed.