China FX Reserves Rebound to 6-Month High

Here's China's FX Reserves:
Whoops, that's the U.S. Dollar Index inverted. Here's the right charts:

Reuters: China May forex reserves rise more than expected on weaker dollar, capital controls
Tighter restrictions on taking funds out of the country imposed in recent months continue to keep a lid on capital outflows, said Zhou Hao, a Singapore-based analyst at Commerzbank.

"From their perspective, they have done a very successful job."

Apart from valuation effects, Capital Economics' Julian Evans-Pritchard said China's central bank may also have been purchasing small quantities of foreign currencies again in May after having sold forex to shore up the sagging yuan for 18 straight months.

"This a major shift in policy that has been achieved thanks to an easing of capital outflows," he said.

"Given our forecast for China’s May trade balance (due out on Thursday), today’s figures still point to capital outflows of around $10 billion last month. But this is down from $30 billion in April and $65 billion at the end of last year."
Bloomberg: China Ready to Buy More Treasuries as Yuan Stabilizes
China is prepared to increase its holdings of U.S. Treasuries under the right circumstances, as officials judge the assets are becoming more attractive than other sovereign debt and as the yuan stabilizes, according to people familiar with the matter. Treasuries surged on the news, driving yields to the lowest since November.
What the sources meant to say was:
“When the yuan appreciates, China has the opportunity of building up its foreign reserves as the market has been concerned about the reduction of the reserves,” said Tommy Ong, managing director for treasury and markets at DBS Hong Kong Ltd. “Buying U.S. bonds will help boost confidence, as officials want to show that any anxiety about yuan weakness or devaluation was excessive. They don’t want the exchange rate to appreciate or depreciate in a large magnitude before the Communist Party congress later this year.”

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