June 7, 2020 / 4:30 AM / a month ago

UPDATE 1-China's forex reserves unexpectedly rise in May, regulator sees stability

(Adds quotes from forex regulator)

BEIJING, June 7 - China’s foreign-exchange reserves rose unexpectedly in because of changes in asset prices, even as the yuan weakened on worries over an escalation in Sino-U.S. tensions, and regulators say the country’s economic potential ensures stability ahead.

China’s foreign exchange reserves - the world’s largest - rose $10.233 billion in May to $3.102 trillion, central bank data showed on Sunday.

Economists polled by Reuters had expected the reserves would fall by $10.459 billion to $3.081 trillion due to fluctuations in global exchange rates and the prices of foreign bonds that China holds.

The surprise gain was due to changes in exchange rates and asset prices, China’s State Administration of Foreign Exchange said in a statement, without elaborating.

“Looking forward, our country’s economic potential, resilience, large room for manoeuvre and many policy tools ... will continue to support the overall stability of foreign exchange reserves,” the regulator said.

Foreign inflows into Chinese stocks and bonds have picked up recently as investors bet on an economic rebound. Strict capital controls have also largely helped China keep outflows under control over the past year despite the shock from the coronavirus outbreak, a prolonged trade war with the United States and weakening economic growth.

The yuan fell 1.0% against the dollar in May, while the dollar fell about 0.78% in May against a basket of other major currencies.

China held 62.64 million fine troy ounces of gold at the end of May, unchanged from that of end-April.

The value of China’s gold reserves rose to $108.29 billion at the end of May from $106.67 billion at the end-April, reflecting a rise in the dollar-denominated price of the metal.

Reporting by Judy Hua, Yawen Chen and Ryan Woo; Editing by Kenneth Maxwell and William Mallard

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