Money flowing out of China and copper piling up

Two blog posts from FT Alphaville.

The less-popular yuan
The reversal of currency flows in and out of China is continuing. The PBoC published data on Tuesday showing that the country’s banks were net sellers of yuan in July, selling Rmb3.8bn or $587m. As the WSJ’s Tom Orlik explains, this means that the banks’ foreign exchange purchases are lower than the monthly inflows from trade and investment, and it suggests some “hot money” is leaving — possibly in part because exporters and importers no longer want to settle in yuan.

Of course this is only a change in the direction of flows — and a small one when viewed in context. The chart below from Chinascope Financial demonstrates how, while the trend has been negative since September 2010 and particularly since September 2011, the banks’ overall forex position hasn’t changed that much in the past year:

China’s literally ground-breaking copper inventories
Quoting a Standard Charter report:
We are surprised by three things: (1) the ability of warehouse operators to pack in more copper, (2) the speed at which inventory has reversed the downtrend seen in July (On the Ground 12 July 2012, ‘Copper – On neutral ground’), and (3) the fact that slanting copper bundles, which are perched at the top (Figure 7)and weigh c.3 tonnes each, have not been deemed a safety hazard.

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