SHANGHAI: Foreign exchange assets owned by the People's Bank of China (PBOC) dropped again in July, extending a recent trend, an official at the central bank was quoted as saying on Thursday.
The data indicates that the central bank has reduced, although not stopped, intervention in the currency market as the yuan began a steady rally in July.
The PBOC's forex assets dropped by 200 million yuan ($32.5 million) in July, Sheng Songcheng, the head of the statistics department at the central bank, was quoted by the Financial News daily as saying. The newspaper is the central bank's mouthpiece.
The increase and decrease in the central bank's forex assets mainly reflects its foreign exchange purchases and sales in the domestic currency market.
In line with the government's policy to keep the Chinese yuan relatively stable and within Beijing's desired ranges, the PBOC has persistently intervened in the market to buy or sell foreign currencies, mainly dollars.
"Supply and demand of our country's forex market has reached a basic equilibrium since March's currency reform," Sheng said.
"With the yuan's two-way movements being strengthened, the forex purchases have began showing a downtrend since May."
PBOC data published earlier showed that its forex assets dropped 86.76 billion yuan in June, the first fall since June last year, following a small rise of 361 million yuan in May, which was its slowest increase since July last year.
Chinese firms, including banks, have increasingly held on to dollars while capital inflows into China slow as a result of softening economic growth, and particularly after the PBOC surprised markets by letting the yuan fall in the first four months of 2014.
The central bank also loosened its grip on the yuan in mid-March by doubling its daily trading range.
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