Small Exchange: China’s forex reserves rise, Ethiopia devalues its currency and India’s reserves under threat
This week's currency news rounded up.
China's forex reserves rise again
China's foreign exchange reserves increased slightly in September, for the eighth consecutive month.
The People's Bank of China (PBOC) reports forex reserves rose US$17 billion last month to $3.109 trillion. This was higher than the US$10.5 billion in additional funds added in August and above economists' expectations.
Reuters latest poll revealed reserves were anticipated to rise by around US$8 billion in September.
September marks the first time that China's reserves have risen for eight straight months since June 2014.
After imposing stricter regulations to boost the value of the yuan and discourage capital outflows, China's central bank began relaxing rules, bringing the foreign exchange risk reserve ratio to zero in mid-September.
Ethiopia to devalue its currency
In an effort to heighten demand for major exports, Ethiopia's central bank will devalue its currency this week.
The National Bank of Ethiopia revealed it will devalue the birr, Ethiopia's currency, by 15% effective 11 October.
The African nation exports coffee, leather and gold. However, in recent years income from these products has fallen as a result of lower global commodity prices, leading to a reduction in foreign exchange reserves.
The International Monetary Fund said Ethiopia's economy has grown 9% year-on-year in September 2017.
Africa News reports this is Ethiopia's first currency devaluation since 2010, putting the birr at 26.91 to the dollar, up from the official market estimate of 23.40 birr to US$1.
India's Punjab region pushes for more power plants
The government of Punjab, India recently signed a contract to establish two additional imported fuel-based power plants in the region, which may put extra pressure on foreign exchange reserves.
The Express Tribune reports the government agreed on a liquefied natural gas-fired power plant, operation within 26 months, as well as a coal-based plant that's still in its initial planning stages.
These plants were co-signed by the federal government, despite the availability of surplus power from 2018.
Less than a year ago, the Cabinet Committee on Energy imposed a ban on any newly imported fuel power plants.
Guaranteed investor payments could potentially reduce the value of India's foreign exchange reserves.
Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.