Hot money inflows surge in August

Data from China’s central bank showed that turmoil in global financial markets may be driving speculative capital into the country, potentially complicating Beijing’s efforts to tame inflation and limit the risk of a real estate bubble, Bloomberg reported. Financial institutions’ renminbi positions, accumulated from the purchase of foreign exchange by the central bank, grew by a net RMB376.94 billion (US$59 billion) in August, 72% more than in July and the biggest increase in five months, the People’s Bank of China said. With bank’s reserve requirements already at record levels, the inflows may add to political pressure for the currency to climb, suppress money market rates, and force the central bank to sell more bills to soak up the cash. The central bank set the reference rate for the RMB at 6.3772 per dollar on Thursday, its highest level since 2005.