Forex funds rebound over stronger trade, yuan

China's yuan funds outstanding for foreign exchange in domestic financial institutions returned to growth in December as the country's trade surplus widened and its currency continued to strengthen.

The funds increased by 134.6 billion yuan (21.5 billion U.S. dollars) in December to bring the total to 25.85 trillion yuan, latest figures from the People's Bank of China showed.

The growth followed a drop of 73.6 billion yuan in November and was faster than a monthly rise of 130.68 billion yuan in September and 21.63 billion yuan in October.

Analysts attributed the rebound to the country's improving trade and the yuan's appreciation against the greenback, which made more enterprises sell foreign currency for yuan.

China's trade surplus surged 61 percent year on year to 31.6 billion U.S. dollars in December 2012, according to customs figures.

The yuan strengthened to a central parity rate of 6.2855 against the U.S. dollar from 6.2908 in December.

Chinese individuals and institutions exchanged 136.6 billion U.S. dollars in foreign currency for yuan through Chinese banks while buying 118.1 billion U.S. dollars in foreign currency from financial institutions in November 2012, according to data from the State Administration of Foreign Exchange (SAFE).

This resulted in a foreign exchange surplus of 18.5 billion U.S. dollars in November, widening from the 7.8-billion U.S. dollar surplus registered in October, the SAFE figures indicated.

The amount of yuan funds outstanding for foreign exchange decides the amount of yuan funds that the central bank has to inject into the domestic market, as the yuan remains inconvertible under the capital account.

China's funds outstanding for foreign exchange have undergone fluctuations this year due to uncertainties in the global financial market. The figure declined in July and August before two monthly rises in September and October.