Yuan devaluation expectations drive PBOC to sell off foreign reserves

Expectations that the yuan will devalue further have boosted demand for the US dollar, forcing China’s central bank to sell off US$87.2 billion in foreign reserves to prop up the former currency’s value, bringing down its holdings to US$3.44 trillion as of the end of November, South China Morning Post reported. “The pick-up in capital outflows appears to have been predominately driven by increased expectations for renminbi depreciation,” Capital Economics China economist Julian Evans-Pritchard said in a note. “A rise in offshore interest rates due to the increased likelihood of a December Fed rate hike will also have added to outflow pressures.”