BEIJING (Reuters) – China’s foreign exchange reserves in May fell to $3.19 trillion, their lowest since December 2011, central bank data showed on Tuesday, likely due to the effects of a stronger dollar and sporadic official intervention.

But analysts said the drop did not necessarily suggest a resurgence of speculative capital outflows.

The reserves, the world’s largest, fell by $27.9 billion in May – the biggest monthly drop since February.

They rose by $7.1 billion in April and $10.3 billion in March, reflecting easing capital outflows and the dollar’s drop against non-dollar currencies such as the euro and yen.

“It mostly reflects exchange rate fluctuations which we estimate lowered the dollar value of the portion of the reserves held in other currencies by $25 billion,” Julian Evans-Pritchard, from Capital Economics, wrote in a note.

Chinese 100 yuan banknotes are seen in this picture illustration taken July 11, 2013. REUTERS/Jason Lee/File Picture Illustration

Economists polled by Reuters had predicted foreign exchange reserves would fall to $3.20 trillion at the end of May from $3.22 trillion at the end of April.

The People’s Bank of China has intervened in foreign exchange markets to cushion the yuan against capital outflows as markets brace for a rise in U.S. interest rates this year.

China said it will give the United States a 250 billion yuan ($38 billion) investment quota for the first time to buy Chinese stocks, bonds and other assets, deepening financial ties and interdependence between the world’s two largest economies. The announcement was made at the bilateral Strategic and Economic Dialogue in Beijing on Tuesday.

U.S. central bank chief Janet Yellen said in late May that the Federal Reserve should raise interest rates “in the coming months” if the U.S. economy picks up as expected and jobs continue to be generated, bolstering the case for a rate increase in June or July.

Heavy capital outflows seen last year seem to have subsided after the PBOC’s heavy intervention to support the yuan in January and February, though the more recent weakening of the yuan to its lowest levels this year has put outflows back on the radar.

(Reporting by Winni Zhou and Kevin Yao; Writing by Sue-Lin Wong; Editing by Jacqueline Wong and Nick Macfie)

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