Chinese banks continue net forex purchases

Chinese banks bought more foreign currency than they sold in May, the 10th consecutive month of net foreign exchange purchases, China's forex regulator said on Monday.

Chinese lenders bought 141.9 billion U.S. dollars' worth of foreign currency in May and sold 137.9 billion U.S. dollars' worth, resulting in a net buy of 3.9 billion U.S. dollars, the State Administration of Foreign Exchange (SAFE) said in a statement.

The run of net forex purchases began in August 2013, but the surplus has been narrowing, down from 9.7 billion U.S. dollars in April, 40.2 billion U.S. dollars in March, 45.7 billion U.S. dollars in February and 73.3 billion U.S. dollars in January.

In the first five months of 2014, Chinese banks bought 809.2 billion U.S. dollars in foreign currency and sold 636.3 billion U.S. dollars, bringing the net purchase volume to 172.9 billion U.S. dollars, according to the SAFE statement.

Forex transactions are a major cause of fluctuations in China's forex reserves. Surpluses may suggest pressure from trans-border capital inflow.