Small Exchange: China’s forex sales slump, Euro movement forecast and currency sales rise in UK

Peter Terlato 24 April 2017 NEWS

international money currency

This week's currency news rounded up.

China's Q1 forex sales slump

China’s State Administration of Foreign Exchange (SAFE) has released data which shows Chinese banks’ net foreign exchange sales shrank 67% year-on-year during the first quarter 2017, down to $40.9 billion.

China’s forex reserves bottomed out in January, striking a new four-year low as the country’s central bank sold dollars to help revitalise its local currency, the renminbi (CNY).

During a press conference in Beijing, SAFE spokesperson Wang Chunying said capital outflow pressures had softened, while supply and demand for China’s forex reserves have stabilised since January 2017.

“China’s cross-border capital inflows and outflows will become more balanced, indicating strengthening capability of withstanding and adapting to the adjustments of the external environment,” Chunying said.

Earlier this month the US Treasury Department officially declined to continue labelling China as a currency manipulator. This decision has gone a long way to ease bilateral tensions with Beijing.

Potential Euro movements post French election

UK-based bank HSBC issued a client update, outlining its views on potential Euro currency fluctuations following the first round of the upcoming French presidential election, Pound Sterling Live reports.

Anticipated inaccuracies in polling data, the latest terror atrocities in Paris and growing regional tensions make results unpredictable and reactions will depend on candidate combinations in the second round.

Here are HSBC's four scenarios for the Euro after the first round of the elections:

  • Good-good: Macron vs Fillon – EUR-USD to rally towards 1.12
  • Good-bad: Macron vs Le Pen – EUR-USD to remain range-bound between 1.0350 and 1.09 (upper half)
  • Bad-good: Le Pen vs Fillon – EUR-USD to remain range-bound between 1.0350 and 1.09 (lower half)
  • Bad-bad: Le Pen vs Mélenchon – EUR-USD to fall sharply towards 0.90

UK online currency sales surge

After British Prime Minister Theresa May called for a snap election in June, the value of the Great British Pound (GBP) has swelled and online currency sales have soared.

One quarter of the UK's foreign exchange transactions are processed by Post Office Travel Money. Its latest Holiday Money Index report saw online currency sales jump by 147% on Tuesday and Wednesday last week, compared with the same period one year earlier.

Online currency sales have already risen by 47% in April year-on-year.

Post Office Travel Money said the increase in sales was driven by Brits planning to travel abroad during the summer months, taking advantage of improving exchange rates and buying foreign cash in advance.

Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.

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