(Yicai Global) Nov. 8 -- China's foreign exchange reserves rose nearly 0.8 percent in October from the previous month as the US dollar weakened.

China's forex reserves stood at USD3.0524 trillion as of Oct. 31, up USD23.5 billion from a month earlier, according to data released yesterday by the State Administration of Foreign Exchange. The US dollar index fell 0.5 percent to 111.5.

The rebound in foreign exchange reserves was mainly due to the positive valuation effect generated by the exchange rate translation and asset price changes, said Wen Bin, chief economist at China Minsheng Bank.

China's trade surplus came in at USD85.1 billion last month, up USD400 million from September, hitting the third highest value of the year and supporting the forex reserves in October, said Zheng Houcheng, director of Yingda Securities Research Institute.

The euro rose 0.8 percent, the UK pound soared 2.7 percent, and the Japanese yen fell 2.7 percent last month from September. Major national financial asset prices jumped in the period, with the S&P 500 index, the Eurozone Stoxx 50 index, and the Nikkei 225 index up 8 percent, 9 percent, and 6.4 percent, respectively.

Although the 10-year US bond yield edged up 0.3 percentage point and the Eurozone bond yield rose 0.1 point in October from the previous month, the 10-year UK Treasury yield fell 0.5 point and the 10-year Japanese government bond rate fell 0.02 point, resulting in a favorable situation for the exchange reserves, Zheng noted.

The US ISM manufacturing purchasing managers index and the US Markit manufacturing PMI are likely to fall into contraction territory this month, indicating that the country's macroeconomy will enter recession, which will depress the 10-year US bond maturity yield, Zheng pointed out.

On the back of the macroeconomic pressure, the US Federal Reserve is likely to slow down the interest rate hikes and start rate cuts next year, he added, noting that the dollar index is expected to fall back next year from its high level, favoring China's foreign exchange reserves.

Editor: Futura Costaglione