Rise in Chinese and Swiss reserves - BBH

Analysts at BBH suggest that perhaps the biggest surprise today was the increase in China's reserves as the small increase of $6.9 bln stems a seven-month drop and compares with expectations for a nearly $30 bln decline.  

Key Quotes

“The tightening of formal and informal capital controls appear to be working.  The gain in reserves is also impressive given the valuation adjustment spurred by the dollar's broad gains in February.  The yuan was steady against the dollar in February (+0.25%), and it is up 0.65% year-to-date.  The offshore yuan (CNH) is up 1.1% this year.”

“While the rise in China's reserves means less intervention, the rise in Switzerland's reserves means more intervention.  Swiss reserves jumped 3.8% in February, the largest rise in a couple of years.  Reserves rose to CHF668.2 bln from CHF643.9 bln.  Valuation considerations, and especially the euro's decline likely flattered Swiss reserves, but the increase in sight deposits is consistent with material intervention.  The euro toyed with the CHF1.0650 area throughout the month.  The single currency is recovering this month and today, near CHF1.0740 is at its best level since late January.”