Forward Book of PBOC

March 31st, 2016 9:35 am | by John Jansen |

Via Bloomberg:

PBOC Discloses Currency Forward Positions Amid Intervention Bets
2016-03-31 12:33:22.671 GMT

By Bloomberg News
(Bloomberg) — China’s central bank revealed its short
foreign-currency positions in forwards and futures for the first
time, a decision that Australia & New Zealand Banking Group Ltd.
said will help show the extent of the monetary authority’s
support of the yuan.
The People’s Bank of China held $28.9 billion of such
positions with commercial lenders as of end-February, according
to a statement posted on its website. It added that it made
short-foreign currency trades in derivatives with commercial
lenders to meet demand from companies looking to hedge overseas
liabilities.
“It looks like this is the first time they are reporting
their forwards book, and we finally get an idea of their
forwards intervention,” said Khoon Goh, a senior foreign-
exchange strategist at ANZ. “It indicates that their
intervention activity is a lot more than we had previously
estimated in February.”
The nation’s currency reserves fell at a slower pace in
February, prompting speculation that the central bank was using
derivatives — which don’t immediately show up in the data — to
prop up the yuan. The figures don’t necessarily give a
comprehensive picture because non-PBOC institutions may absorb
flows, Goldman Sachs Group Inc. economists wrote in a March 7
note.

Reserves Shrink

The world’s largest currency hoard dropped by $28.6 billion
to $3.2 trillion in February, the smallest decline since June
and less than the $40.9 billion decrease predicted by economists
surveyed by Bloomberg. The central bank burnt through $513
billion of the stockpile last year to support the yuan since a
surprise devaluation in August.
Hedging demand from companies has increased since last year
as the yuan became more flexible against the dollar, the PBOC
said, adding that it will keep providing such products based on
real needs when the forwards contracts mature.

To contact Bloomberg News staff for this story:
Tian Chen in Beijing at tchen259@bloomberg.net
To contact the editors responsible for this story:
Richard Frost at rfrost4@bloomberg.net
Robin Ganguly

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