China FX reserves rise again in January, analysts not sure if Beijing is intervening

China's foreign exchange reserves increased in January for the twelfth month in a row, but analysts are divided on whether Beijing has been intervening to brake recent strength in the yuan.

According to the People's Bank of China, the Asian giant's reserves increased by $22bn from December to reach $3.161trn (consensus: $3.170trn).

Last month's increase was likely entirely the result of the yuan's recent 3.5% appreciation against the greenback - its biggest gain for a single month since China's currency was unpegged from the US dollar.

Nevertheless, against a basket of currencies of its main trading partners, or on a trade-weighted basis, the yuan had only advanced 0.7%.

Even so, Mark Williams at Capital Economics said he was surprised by how benignly Beijing had reacted towards yuan strength.

Although they were likely watching movements in their currency closely, Williams believed any response was likely to be "more subtle", such as by "managing" state-owned enterprises' investments overseas or by relaxing capital controls.

Furthermore, Capital Economic's forecasts were for a weaker economy going forward to alleviate pressure on the yuan, projecting that it would end 2018 at 6.40 versus the dollar, up from 6.26 at present.

On the other hand, pending confirmation in the form of more complete data from the PBoC, Freya Beamish at Pantheon Macroeconomics said Wednesday's figures did suggest the central bank had been intervening to stem gains in the yuan.

"If the declines in global bond prices at least partially have been realised then these data suggest that the PBoC has been intervening to prevent a sharper appreciation.

"In any case, the authorities have been leaning against RMB appreciation in other ways. We reckon the Bank is uncomfortable with the strength of the RMB and will soon begin to loosen the screw on capital outflows, after clamping down last year."

Since mid-2014, China's FX reserves had declined by $832bn.