Foreign Exchange Reserves and Sudden Devaluation

sudden devaluation: China dollar reserves, by far the world largest, dipped $93.9 billion last month to $3.557 trillion, according to new data released by China central bank on Monday, according to Deutsche Welle. August was the fourth consecutive month reserves fell, putting the figure at its lowest level since August 2013. The cause: Beijing sold dollars to buy yuan, in an effort to support the value of its own currency following worries over a sudden devaluation. In previous years, China government had bought dollars to slow the appreciation of the yuan. That move, coupled with wild swings on the Shanghai stock exchange, fueled fresh concerns about the Chinese economy, causing jitters in markets around the world. Jittery markets The drop in the central bank foreign exchange reserves left market analysts questioning how sustainable China efforts to support the yuan are, as capital flows out of the country due to fears of an economic slowdown and prospects of rising US interest rates. 0:00:00 0:00:00China seeks to reassure markets The decline follows a nearly two percent devaluation of the yuan on Aug. 11, which prompted heavy selling of the currency. (news.financializer.com). As reported in the news.