September 18, 2017 / 8:48 AM / in a month

UPDATE 1-China banks' net forex sales hit 26-month low as outflows ease

* Aug commercial banks’ net forex sales $3.8 bln, 26-month low

* SAFE expects cross-border capital flows to be more stable

* Aug c.bank net forex sales $125.2 mln, 22-month low

BEIJING, Sept 18 (Reuters) - Net foreign exchange sales by China’s commercial banks fell to their lowest in 26 months in August, as capital outflows eased due to strict regulatory curbs and a stronger Chinese yuan.

China’s commercial banks sold a net $3.8 billion of foreign exchange in August, the lowest since June 2015, compared with a net sale of $15.5 billion in July, the State Administration of Foreign Exchange (SAFE) said in a statement on its website on Monday.

For January to August, net forex sales stood at $113.2 billion, the foreign exchange regulator said.

It said in an accompanying statement that China’s cross-border capital flows became more balanced in August and cross-border capital flows are expected to become more stable, orderly and balanced in the future.

Data issued by the central bank on Friday showed its net foreign exchange sales fell to 821 million yuan ($125.2 million) in August, the lowest in 22 months, from 4.6 billion yuan in July, painting a similar picture of easing capital outflows.

Earlier data showed that China’s foreign exchange reserves edged up for a seventh straight month in August as a surging yuan and tighter regulations signal the tide may be turning in China’s battle against outflows.

The yuan has gained about 6 percent against the dollar so far this year, after dropping 6.5 percent last year, as authorities took concerted steps to flush out bearish bets on the Chinese currency and head off risks to the economy from capital outflows.

Measures have ranged from tighter policing of money moving offshore to investigations into overseas investments by some Chinese companies.

In August along, the yuan gained 2.1 percent against the dollar - the best month on record.

$1 = 6.5570 Chinese yuan renminbi Reporting by China monitoring desk and Kevin Yao; Editing by Kim Coghill

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