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China's foreign exchange reserves posted their biggest monthly fall on record in August, reflecting Beijing's attempts to halt a slide in the yuan and stabilize financial markets following its surprise move to devalue the currency last month.China's reserves, the world's largest, fell by $93.9 billion last month to $3.557 trillion, central bank data showed on Monday.The drop left market watchers questioning how sustainable China's efforts to support the yuan are, as capital flows out of the country due to fears of an economic slowdown and prospects of rising U.S. interest rates.
originally posted by: Astyanax
a reply to: maddy21
basically a viscous cycle
Then there's no need to panic. It's be a while before it oozes round.
So basically China is spending Billions from its FX reserves trying to stabilize the currency.
Dec. 11 (Bloomberg) -- For the first time, China has a real shot at getting the International Monetary Fund to endorse the yuan as a global reserve currency alongside the dollar and euro.
In late 2015, the IMF will conduct its next twice-a-decade review of the basket of currencies its members can count toward their official reserves. Including the yuan in this so-called Special Drawing Rights system would allow the IMF to recognize the ascent of the world’s second-biggest economy while aiding China’s attempts to diminish the dollar’s dominance in global trade and finance.
China’s $1.3 trillion of U.S. Treasury bonds sounds like 7% of the $17.7 trillion U.S. federal debt outstanding, but a third of the debt was supposedly “purchased” by the U.S. government to back Social Security and other purposes. Of the net U.S. public debt outstanding, China owns about one in every seven dollars of U.S. Treasury Bonds.
“For a long time the threat that Beijing might sell US Treasuries rang hollow, but no longer,” according to Lombard. “Growth trouble across the Pacific may have a much bigger impact on US yields in 2015 and 2016 than the expected pace of US central bank tightening” from the Federal Reserve, they argue.