3Q foreign exchange reserves may top $2.5t

09:06, October 13, 2010      

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China's currency holdings may have hit a record $2.5 trillion by the end of the third quarter, fueling concerns over possible yuan strengthening.

The nation's foreign exchange reserves are likely to jump by roughly $48 billion in the third quarter, compared to a gain of $7 billion in the second quarter, according to a median estimate of eight economists surveyed by Bloomberg.

This would take the nation's currency holdings - already the largest in the world - to a new high.

By the end of June, Mainland China's foreign exchange assets totaled $2.45 trillion, according to the People's Bank of China.

Exact third quarter data will be released by People's Bank later this week.

Accelerating growth, as seen via a growing trade surplus in recent months compared to the second quarter, could make currency holdings climb at a faster pace, said Chang Jian, a Hong Kong-based economist with Barclays Capital.

Figures measuring short-term capital inflows released by the central bank have seen a sharp increase in August from July, which will also lead to an up tick in currency holdings, Chang added.

This would add to pressure on yuan appreciation, the Barclays Capital economist said.

US Treasury Secretary Timothy Geithner recently renewed the call for faster yuan moves at the annual meetings of the World Bank Group and the International Monetary Fund in Washington last week.

In response, China will allow visible yuan appreciation as a way of avoiding a trade war, Wang Tao, head of China economic research at USSecurities said in a note distributed Monday.

The yuan will not continue the strong gains seen over the past few weeks, Barclays Capital's Chang said.

The yuan is expected to land at around 6.6 to the dollar at the end of the year, she believes.

Source: Global Times


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