Research Team at Nomura, notes that the EM central banks ex-China and OPEC countries sold $9.7bn of foreign currencies in January. Key Quotes “Of the 20 EM central banks we track (excluding China and oil producers), 9 sold reserves, 4 bought, and 7 did not intervene. • We estimate that Hong Kong sold $4.9bn of foreign currency during the month of January, after having bought $2.8bn in December. • Mexico continued to intervene, selling $1.2bn of foreign exchange reserves in January, compared with $0.7bn in December. Heavy selling of FX reserves in November was due to the $200mn per day of FX sales which started at the end of July and terminated in November (selling of $2.8bn). The Banxico’s new rule is to intervene initially with a daily depreciation of 1%, with an option to intervene again at 1.5%, if necessary, resulting in lower overall interventions. • We estimate that Taiwan bought reserves at a pace of $0.8bn in January, after having sold $2.5bn of reserves in January. Turning to China, we estimate that the PBoC sold around $93.9bn of FX reserves in January. This relatively large drawdown is consistent with recent action from the PBoC to stabilize market expectations. Since 8 January, the daily USD/CNY fixing has been an average 247pips below the previous day’s official onshore spot closing rate. In addition, the surge in CNH funding costs between 11 and 12 January was also linked to the authorities’ aggressive selling of USD/CNH, following the widening of the offshore and onshore spot USD/RMB basis on 6 January. Another possible reason for drop in reserves in January is that local demand (corporate and household/retail) for USD is likely to have remained strong given RMB depreciation expectations, macro concerns and the ongoing anti-corruption drive. Oil producers continued to sell foreign currency in January, as they had done since the beginning of 2015, whereas oil prices continued to make fresh new lows in January. Until governments can instate fiscal reforms to rebalance their budgets and as long as oil prices remain at depressed levels, we expect these trends to continue. In January, we estimate they sold reserves to the tune of $19.5bn, around $4.5bn above the monthly average since the beginning of 2015.” For more information, read our latest forex news.