China: FX reserves likely to drop from USD2.998trn to USD2.969trn – RBC CM

Sue Trinh, Head of Asia FX Strategy at RBC Capital Markets, suggests that the consensus expects China’s FX reserves to drop from USD2.998trn to USD2.969trn.

Key Quotes

“This looks about right to   us, but we stress that the forecasting error is high given China’s innovative intervention policy. The marked decline in FX reserves would lead to a change in RMB management. This was a view that proved accurate after the Chinese government changed the language on its currency policy on 5 March, suggesting that the reserve drawdown will slow in future. Tomorrow’s February trade data is out. South Korea’s strong trade data earlier in the month bodes well for the China figures, as China’s exports generally move in line with S. Korea’s.”