CHINA’S foreign exchange reserves increased for the second month in a row as market sentiment toward the yuan improved and a stronger yen and euro boosted the headline number.

    The People’s Bank of China said Saturday that the world’s largest stockpile of foreign currency increased by US$7.09 billion in April to US$3.220 trillion. The slight uptick follows a gain of US$10.3 billion in March.

    The market’s confidence in the yuan has strengthened as data released in April showed a rebound across several indicators and the Federal Reserve signaled it will hold off on interest rate increases.

    Whether China’s momentum can be sustained remains to be seen, as some suggestions of a U.S. rate hike in June may revive capital outflow pressures.

    “Less demand for dollars with more confidence in the yuan eased capital outflows,” said Tommy Xie, an economist at OCBC Bank in Singapore.

    Still, Chinese businesses and individuals have continued to take money out amid the prolonged economic slowdown.

    But the pace of outflows has moderated in recent months thanks to the central bank’s tightened controls of the country’s financial borders and its effort to keep the yuan stable, thereby helping reduce Chinese appetite for foreign assets.

    A weaker U.S. dollar, as a result of a less hawkish U.S. Federal Reserve, has lent the Chinese central bank a hand in steadying the yuan and easing outflows. (SD-Agencies)