(Updates to advise clients pictures are available for this
* FX reserves drop $19 bln to $3.166 trln from $3.185 trln
* Third straight monthly fall and more than expected
* PBOC intervention keeping yuan stable for now - analysts
* But further weakening of the yuan expected
By Adam Jourdan and Sue-Lin Wong
SHANGHAI/BEIJING, Oct 7 China's foreign exchange
reserves fell for a third straight month in September and by
slightly more than markets had expected, suggesting fresh
capital outflows from the world's second-largest economy.
Forex reserves fell nearly $19 billion to $3.166 trillion,
from $3.185 trillion in August, central bank data showed on
Economists polled by Reuters had expected reserves to ease
to $3.18 trillion, after dropping to the lowest since 2011 in
August after the central bank intervened to support the yuan
currency as it weakened to near six-year lows.
China's reserves, the largest in the world, fell by a record
$513 billion last year after Beijing devalued the yuan, sparking
a flood of capital outflows that threatened to destabilise the
economy and alarmed global financial markets.
But declines had slowed sharply in the first half of this
year as authorities tightened capital controls and cracked down
on forex trading which they suspected to be speculation.
Tentative signs of stabilisation in the economy and
investment inflows were also believed to be offsetting outflow
However, while September's $18.8 billion drop was modest
compared with overall reserves, it was larger than a decline of
$15.89 billion in August and the biggest in three months.
"It's almost $20 billion, which is quite a considerable
fall," said Julian Evans-Pritchard, China economist at Capital
Economics, adding the impact of exchange rates and bond market
movements meant the real figure was probably even higher.
"I think there is still quite significant intervention in
the currency markets by the PBOC and I think today's data
China was potentially even more vulnerable that last year to
a large rise in capital outflows that would hit currency
markets, he added.
"There is still definitely some vulnerability on the capital
flows side, and obviously that has implications for the
currency. Any big pick-up in capital outflows is going to put
downward pressure on the renminbi."
Traders believe the People's Bank of China (PBOC) has
stepped in via state-run banks since July to slow the pace of
depreciation in the yuan, which has weakened 2.7 percent against
the U.S. dollar so far this year.
China is believed to have wanted stability in the currency
ahead of two high-profile global events: its hosting of a G20
leaders summit in September and the yuan's inclusion in the
International Monetary Fund's basket of reserve currencies from
But most market watchers expect the central bank will allow
the yuan to resume its gradual descent later this year,
especially if the chances of a U.S. interest rate hike are seen
rising, buoying the dollar.
The yuan is expected to fall another 3 percent by next
September, according to a Reuters poll of more than 70 foreign
exchange strategists issued on Thursday.
Regulators will continue to crack down on forex violations
and strengthen monitoring of cross-border capital flows, the
State Administration of Foreign Exchange (SAFE) said last month,
adding that it will also push forward to achieve capital
account convertibility in an orderly manner.
China's gold reserves rose to $78.169 billion at the end of
September, from $77.18 billion the previous month.
(Reporting by Adam Jourdan and Sue-Lin Wong; Editing by Kim