China forex reserves in record fall as Beijing tries to calm markets

www.reuters.com...
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.

So basically China is spending Billions from its FX reserves trying to stabilize the currency. But a falling FX reserves only indicates to the market that the currency value is artificially propped up which leads to the currency falling further.This is basically leading to a Capital outflow from the country. As the currency falls it will be harder to shift its assets overseas so i assume this will only speed up the Capital outflow ? WHich means more money has to be spent from the FX reserves on the currency...so...basically a viscous cycle....leading to investors

a reply to: maddy21

basically a viscous cycle

Then there's no need to panic. It's be a while before it oozes round.

China continued losses yesterday and US is following in the red. It seems the next psychological barrier is 3k. If China finishes under 3k for the week the US may drop under 15,5.

I agree that this will likely unwind over a few small cycles but am not certain how long that will be. Maybe this time next year we see 2.2k, 12,5.

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.

Yep, no need to panic ;-) It's just the stock market which in our case is just another casino. Would anyone panic if a Las Vegas casino went under, other than the vultures employed by it or running it?

Cheers - Dave

a reply to: maddy21

So basically China is spending Billions from its FX reserves trying to stabilize the currency.

Keep calm an carry on, eh?

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.

www.bloomberg.com...

Keep that in mind for next month with China stocking up on gold and showing up with vessels in open waters near Alaska some weeks after the US-Navy took a little trip to the new islands in the South China Sea. Not to mention all those explosions recently, four in China during the last few weeks. And now they drop treasuries, could be another warning shot as well. Yes.

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.

www.breitbart.com...

Rumors of war? No way you think? Remember ISIS, Syria, Iran or the whole middle-eastern mess as a whole, maybe Ukraine? Hopefully nobody drops a match accidentally now, looks like a friggin mess and some folks (actually all of them) already spilled petrol everywhere.

Well I don't really see China stopping the drop anytime soon, they've been fluffing their numbers for a while and it's just catching up with them.

It's most likely going to be a bad week or even month for and CEO over in China. Not due to the market drop but from angry investors and employees.