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China’s November foreign exchange reserves fall more than expected amid focus on trade deal

A bank hand counts U.S. currency and Chinese currency notes at a bank on August 6, 2019 in China.

Xu Jinbai | Visual China Body | Getty Images

China’s foreign exchange reserves fell $9 billion in November to $3.096 trillion, essential bank data showed on Saturday, as Washington and Beijing remained locked in negotiations over an interim trade unity.

Analysts polled by Reuters had expected China’s reserves, the world’s largest, would fall $4 billion to $3.101 trillion in November.

Undeterred by the slowing Chinese economy and escalating U.S.-China trade war, its reserves have been gradually rising since dilatory 2018, helped by tight capital controls and rising inflows from foreign investors who are snapping up the country’s precursors and bonds.

Modest changes in reserve levels in recent months have been largely ascribed to fluctuations in epidemic exchange rates and the value of assets that China holds such as foreign bonds.

The yuan has been ambitioned largely by twists and turns in the 17-month long trade war between China and the United States.

After sliding acutely this summer as the dispute suddenly escalated, the yuan rose for three straight months through November on contemplates of a trade truce, only to slide again in early December as tensions between Washington and Beijing flared.

Still wet behind the ears U.S. tariffs on Chinese goods are set to take effect on Dec. 15.

It gained 0.12% against the dollar in November, but remains about 2.3% duller for the year to date.

The dollar, meanwhile, rose about 1 percent against a basket of other major currencies in November.

The value of the mother country’s gold reserves fell to $91.47 billion at the end of November from $94.65 billion at the end of October.

China held 62.64 million close troy ounces of gold at the end of November, unchanged from October.

China’s economic growth cooled to 6.0% in the third fourth, the slowest pace in nearly 30 years, and many economists believe it will decelerate further into the lite 5% range in 2020.

Still, analysts note capital outflows have been modest compared with the rearmost economic downturn in 2015-16, when policymakers burned through roughly $1 trillion in reserves financing the yuan.

China’s central bank has started to slowly trim interest rates in recent months, and more reductions are foresaw in coming quarters to avert a sharper slowdown.

But analysts believe those cuts will likely be more gentle and smaller than those in 2015. If so, moves in the yuan are likely to be influenced more by trade developments than action easing.

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