Small Exchange: China’s foreign reserves slip, bitcoin paused, forex faux pas
The week’s currency news rounded up.
China’s foreign currency reserves continue to plummet
The State Administration of Foreign Exchange (SAFE) reveals reserves fell by US$13 billion in January, after a US$41 billion decline the previous month, bringing foreign reserves down to US$2,998 billion.
This is the first time since 2011 that reserves have dipped below US$3 trillion, the ABC reports.
China’s foreign reserves have fallen around 25% since their peak of US$4 trillion in mid-2014.
Last month we reported that the yuan continues to lose value against major currencies. In an effort to restrict outgoing capital, the Chinese government began tightening foreign currency exchange rules.
Market experts warn that if this continues, it may prompt a sudden devaluation of the renminbi.
Temporary freeze on Bitcoin currency withdrawals in China
Late last week, two of China’s biggest bitcoin exchanges were forced to pause withdrawals of the virtual currency after a meeting between the country’s central bank and a group of exchange executives.
In a statement released Thursday, the People’s Bank of China encouraged nine different bitcoin exchange agencies to closely adhere to relevant regulatory guidelines, the Financial Times reported.
Following this, OKCoin and Huobi.com ceased providing withdrawal facilities for its customers, while BTC China engaged in a 72-hour withdrawals review period.
Bitcoinity says over the last six months, renminbi exchanges accounted for 98% of global bitcoin trades.
Guyanese forex intervention under fire
Last week, for the first time since 1989, the Bank of Guyana began controlling foreign exchange rates at cambios and commercial banks, much to the chagrin of the country’s Private Sector Commission.
Now concerns are being raised about the legality of this action, according to news site Demerara Waves.
Former Attorney General Anil Nandlall says the Dealers in Foreign Currency (Licensing) Act states that the price at which a licensee may buy or sell any foreign currency shall be determined by the licensee.
“To my mind, Section 9 is quite clear in its language and spirit. It harbors no room for ambiguity or equivocation. The Central Bank can lawfully play no part in fixing or influencing those prices,” he said.
Sources estimate tighter regulations may force dealers to engage in more black market transactions.
Each week Small Exchange sums up currency news from around the globe and looks at how it impacts exchange rates and options.