China's foreign exchange reserves in April fell more than expected, to a five-month low, as the US dollar rebounded and on growing signs that Chinese regulators are less worried about capital flight. Reserves fell $17.97 billion in April to $3.125 trillion - the lowest since November 2017, compared with a rise of $8.34 billion in March, central bank data showed on Monday.
Economists polled by Reuters had forecast reserves would drop around $10 billion in April to $3.133 trillion, with a stronger US dollar versus other currencies expected to depress the value of China's dollar-denominated reserves. The fall in non-dollar currencies against the US dollar and correction in asset prices led to the small reserves drop in April, the State Administration of Foreign Exchange (SAFE), China's foreign exchange regulator, said.
"The drop reflected almost exclusively the valuation effect of a firmer USD in April," said Andy Ji, currency strategist at Commonwealth Bank of Australia in Singapore. "In other words, there are no signs of capital outflows at the current juncture." But Julian Evans-Pritchard at Capital Economics said he believed China's current account returned to a healthy surplus in April from a seasonal deficit in March, implying a sharp reversal in capital flows from net inflows to net outflows.
"This is nothing to worry about, however. Such volatility in net cross-border flows is not uncommon at this time of year and net outflows look to have remained well within regulators' comfort zone," he said in a note. The dollar index, measuring it against other major currencies, rose 2 percent last month.