CHINA’S foreign exchange reserves rose for a 10th straight month in November, though slightly less than market expectations, as tight regulations and a strong yuan continued to discourage capital outflows.

Capital flight had been seen as a major risk for China at the start of the year, but a combination of tighter capital controls and a faltering U.S. dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy.

Reserves rose US$10 billion in November to US$3.119 trillion, compared with an increase of US$700 million in October, central bank data showed.

Economists polled had expected reserves to rise by US$11 billion to US$3.120 trillion.

It was the first time that China’s reserves have climbed for 10 months in a row since June 2014, and brought its stockpile — the world’s largest — to the highest since October last year.

The State Administration of Foreign Exchange said the appreciation of non-U.S. dollar currencies and changes in asset prices were the main reasons behind the rise in forex reserves.

Valuation effects due to the dollar’s drop against major currencies such as the euro and yen are also behind the rebound in China’s reserves. The dollar tumbled 1.6 percent against major trading currencies in November.

The yuan has gained about 5 percent against the dollar this year, following a drop of 6.5 percent in 2016, its biggest annual drop since 1994.

China’s foreign exchange reserves dropped by nearly US$1 trillion from a peak of US$3.99 trillion in June 2014 to US$2.998 trillion in January this year as it sought to shore up the yuan and reduce capital outflows. But reserves have since climbed by US$121 billion.

A Reuters poll found that long positions on the yuan held by investors in Asia by end-November rose to the highest since September, as the dollar continues to falter in global markets. .

Some analysts believe more stability in the yuan and less pressure on outflows could prompt authorities to lighten their hand on the currency.

“It therefore seems like an opportune time for [China’s central bank] to take further baby steps toward the long-held goal of exchange rate liberalization, most likely starting with a widening of the yuan trading band,” said Julian Evans-Pritchard, China economist at Capital Economics.

The slide in the yuan and foreign exchange reserves last year prompted China to restrict capital outflows. (SD-Agencies)