China’s central bank has burnt through nearly half a trillion dollars in foreign reserves to support its currency since August, despite criticism it has betrayed its commitment to let market forces drive the exchange rate. Yet sources close to the central bank say the intervention, while costly, was necessary to maintain economic confidence and prevent a disorderly depreciation that could have ripple effects far beyond the currency. The People’s Bank of China has spent about $473bn in foreign exchange reserves since it surprised global markets last August by changing the way it sets its daily guidance rate for the currency, according to Financial Times estimates based on official data.
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