Yuan Falls 2.9 percent, Reserves Take a $40 Billion Hit

China’s currency weakened 2.9 percent to 6.3947 per dollar in the five trading days after the devaluation, including a 0.05 percent decline on Monday. Yuan positions at the PBOC and financial institutions fell by the most on record in July, a sign capital outflows picked up and the central bank stepped up intervention to support the yuan.

The monetary authority bought yuan via agent banks last week to stabilize the exchange rate after Aug. 11 devaluation triggered the steepest slide in two decades. The PBOC, which had maintained a de facto peg of about 6.20 per dollar over the last four months, said there was no basis for depreciation to persist and it would step in to curb large fluctuations.

China’s foreign-exchange reserves are expected to drop by some $40 billion a month as the central bank intervenes to support the yuan, a Bloomberg survey showed.

The forecasts ranged from $3 trillion to $3.71 trillion. The currency is seen weakening 1.6 percent to 6.50 a dollar in the remainder of 2015, the survey showed.

The central bank will frequently intervene in the foreign-exchange market in the next three months as it needs to ensure the currency is stable. China will spend some of its foreign-exchange reserves to achieve that goal.

The People’s Bank of China is limiting the yuan’s depreciation to prevent an exodus of capital as it contends with the slowest economic growth in more than two decades. While that support is eating into the nation’s foreign reserves, which fell $192 billion in the last seven months, the holdings are still more than triple those of any other nation.