China Sells $30 Billion Foreign Reserves to Stabilise Currency

Asia's central banks have spent the year defending their currencies against a strong US dollar, reducing foreign exchange reserves to multi-month lows while failing to calm market concerns or stem capital outflows. Emerging Asia's currencies have been highly volatile this year, caught between China's yuan defense and a booming dollar backed by a hawkish Federal Reserve.

J.P. Morgan analysts calculated that Asian central banks, excluding China, sold more than $30 billion in reserves in the last two months to stabilize currencies. However, this action has not reassured investors about declining returns in emerging nations as dollar yields increase and currencies weaken.

Official figures show a $2.7 billion net outflow from Asian local currency bonds in August, with bond markets in Malaysia, Indonesia, South Korea, India, and Thailand recording their highest net sales since October 2022.

Across the region, foreign exchange reserves have been depleted. South Korea's reserves were $414.12 billion at the end of September, the lowest level since October 2022, while Indonesia's reserves plummeted to $134.9 billion last month, the lowest level since November. However, not all of the change can be attributed to intervention, as the increase in the dollar has reduced the value of other currencies owned by central banks.