The Yuan fell to an eight-year low against the dollar as currency outflows from China picked up in pace. The slide caused China’s foreign currency stockpile to shrink to $3.05 trillion, down from a July 2014 peak of $4 trillion.
China has been battling currency outflows for more than a year, and worries over the country’s stability could lead Beijing to impose additional capital controls.
“Containing capital outflows is the key to keeping China’s systematic risk in check,” Royal Bank of Scotland economist Harrison Hu wrote in a note. “Market turmoil one year earlier showed the strong feedback loop between capital flight and currency depreciation can destabilize China’s financial system and lead to escalating systemic risk.”
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In November alone, China’s foreign currency reserves fell by $69.1 billion – the biggest decline since January. As of January 2017, Chinese savers will no longer face a $50,000 maximum in how much money they can legally get out of the country, which could accelerate outflows.
The Yuan is one of several currencies that have fallen sharply against the dollar since the U.S. election, as expectations of higher inflation and interest rates under a Trump administration suck capital into the U.S.
Earlier this week, The Real Deal broke down how the rising dollar impacts New York’s real estate market. [Bloomberg] — Konrad Putzier