The recent drop in the yuan triggered speculation that China's central bank is depreciating the Renminbi on purpose. But newly released figures show the real reason.

The increase in funds outstanding for foreign exchange in February was 128 billion yuan, 71% lower than January's figure.

Industry insiders say the drop was due to the Chinese New Year holidays and volatility in external markets.

The yuan dropped over 1,000 basis points against the U.S. dollar since mid-February. The exchange rate is now at an 11-month low.

The central bank reiterates the yuan rate depends on the supply and demand of foreign exchange which is based on balance of payments. A PBOC spokesperson says as China has ample forex reserves, there are no grounds for large swings in the yuan.