China’s Yuan should stabilize anytime soon

China’s foreign exchanges reserves have hit their lowest point since December 2011 at USD 3,185 trillion. However Yi Gang, Vice-Governor of the People’s Bank of China (PBOC), said that China still possesses the world’s largest foreign exchange reserves and that stabilization is coming despite short-term depreciation.

According to state-sponsored Chinese experts, the movement of the US dollar (USD) and the unknown schedule of a new rate hike by the Fed explained most of the bearish pressure on the Yuan (CNY), the Chinese currency. Yet in 2015, China had already saw a decline of around USD 500 billion in its foreign exchange reserves, a big outflow that naturally followed “explosive accumulation” in recent years, stressed PBOC Governor Zhou Xiaochuan.

“The Chinese currency’s inclusion in the SDR basket will take effect in October 2016, when it will become a reserve asset,” reminded Liang Hong, chief economist at China International Capital Corp. Chinese authorities are confident that this will be one major step towards less fluctuation and more stability for the CNY.