China's foreign exchange reserve shrank for the third consecutive month in September. The rate of decrease also exceeded market expectations. According to data released by the State Administration of Foreign Exchange, the reserved dipped by $18.8 billion to touch $3.166 trillion. The reserve had declined by $15.89 billion in August.

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The reserve is currently at its lowest level since April 2011. The decline comes amidst speculations that yuan will continue to weaken. It is also expected that the central bank may raise borrowing costs. The currency is also under pressure owing to its growing internationalization. Earlier this month, the yuan was included in the International Monetary Fund's Special Drawing Rights Basket. It has been accorded the third-largest weight in the mix.

Despite China's country s exchange reforms, which were initiated last year, yuan has been under constant depreciation pressure. It also led to the central bank disposing off foreign exchange reserve to keep up the yuan value.

SCMP.com quoted Liao Qun, chief economist at China Citic Bank International said that market would evaluate the chances of currency depreciation by robustness of economy. Yi Gang, Central Bank deputy governor, said that the economy is growing at the rate of 6.5 percent to 7 percent. He also said that the economic condition is more stable than before.

Yuan has depreciated 2.7 percent against the US dollar this year so far. The markets expect that the central bank will let the gradual depreciation to continue.

Tagsyuan, International Monetary Fund, state administration of foreign exchange