US dollar’s relentless advance drives China’s foreign exchange reserves to lowest since 2018

China’s foreign currency reserves fell for the second straight month in August as the strength of the US dollar hammered the value of Beijing’s holdings.

Data from the People’s Bank of China showed that reserves fell 1.58%, or the equivalent of $49.2 billion, to $3.0549 trillion at the end of August. This is the lowest level since October 2018 and below Bloomberg’s estimate for a more modest decline to $3.065 trillion.

China’s gold reserves also declined, falling 2.13% to $1.075 trillion last month from $1.98 trillion in July.

The State Administration of Foreign Exchange attributed the decline in foreign exchange reserves to falling asset prices as the US dollar appreciated.

The greenback has been nearly unstoppable this year as the Federal Reserve’s aggressive tightening campaign makes dollar assets more attractive.

The U.S. dollar index jumped 15% in 2022, hitting a new 20-year high and putting it on track for its biggest annual rise since 1981.

Against individual currencies, the dollar is up 8% against the yuan, 13% against the euro15% against the Britishbookand 20% against Japanyen for the year.

Meanwhile, China’s trade surplus also fell to $79.4 billion in August as export growth continues to struggle, with overseas consumers cutting back on spending as inflation rises sharply.

“China is weakening and uncertainty about its COVID situation will likely lead to more stimulus to support its economy which comes with a weaker yuan,” said Edward Moya, senior market analyst at OANDA. .