(Yicai) April 8 -- China’s foreign exchange reserves surpassed USD3.2 trillion last month, the highest since December 2021, as rising asset prices offset the effect of a stronger US dollar.

As of March 31, the country’s forex reserves were up by USD19.8 billion from February and USD7.7 billion from December, according to figures released yesterday by the State Administration of Foreign Exchange.

Revised expectations on when the US Federal Reserve will start to cut rates boosted the US Dollar Index by 3.1 percent to 104.5 in the first quarter, while the yields on two-year and 10-year US Treasury bonds rose by 35 basis points and 32 bips, said Guan Tao, global chief economist at BOC International China.

Meanwhile, asset prices gained. From January to March, the S&P 500 climbed by 10.2 percent. Higher stock prices helped to counteract the stronger dollar and lower bond prices to stabilize China's foreign exchange reserves, Tao pointed out.

Chinese banks settled more foreign exchange than they sold in February, with settlements topping sales by USD1.7 billion, while a deficit of USD8.2 billion was logged in the first two months of the year, the SAFE revealed earlier. Excluding banks' own transactions, foreign exchange settlement for clients topped sales by USD12.1 billion in February with a surplus of USD17.6 billion in the two-month period.

Guan said that based on banks' forex transactions for clients, a rebound in the Chinese yuan was blocked as the currency continued to consolidate at low levels. But domestic market players sold foreign exchange at pricier levels, leading to a basic balance in supply and demand. Investors sold foreign stock and bonds, so net inflows resumed and cross-border flows improved marginally, he added.

China’s gold reserves rose for the 17th consecutive month in March, climbing by 160,000 ounces from a month earlier to 72.7 million oz, the SAFE also revealed yesterday.

Editor: Emmi Laine