China’s foreign exchange reserves trimmed 0.2% to reach $3.21 trillion from December to January, data from the State Administration of Foreign Exchange (SAFE) said.
Analysts said the slight drop was mainly caused by a strengthening US dollar, which led to the weakening of non-dollar assets in the short term, and the country’s forex reserves will likely stay above the psychological level of $3 trillion for the whole year. However, gold will probably make for a larger share of the reserve to hedge against currency fluctuations.
In the international financial market, new developments connected with coronavirus vaccines, monetary and fiscal policy changes in major economies resulted in a strengthening US dollar index and a decline in the prices of major economies’ financial assets, according to a statement on the website of SAFE.
In terms of China’s forex reserve, the value of non-dollar currencies dropped after conversion to dollar-denominated terms, which -- combined with other changes in asset prices -- led to a decrease in forex reserves in January, the statement noted.
Dollar-denominated assets accounted for about 50-60 percent of China’s total forex reserve, according to analysts.
Analysts predicted that China’s forex reserve will hover above $3 trillion in 2021.
