business
China Central Bank Raises Foreign Exchange Reserve Requirement to Curb Yuan Gains
China's central bank will raise the foreign exchange reserve requirement ratio by 2 percentage points to curb yuan gains.
Key points
- The reserve requirement ratio on foreign exchange deposits rises 2 percentage points to 6 per cent, effective November 15.
- The PBOC set the yuan's daily fixing at 6.7150 per US dollar, weakening it for a second consecutive day.
- The yuan recently broke through 6.65 per US dollar, its strongest level since June 2022.
Why it matters. The tighter onshore foreign-currency liquidity may ease appreciation pressure on the yuan, and the move could slow its near-term gains, according to Goldman Sachs.
The People's Bank of China said on Tuesday it would raise the reserve requirement ratio on foreign exchange deposits by 2 percentage points to 6 per cent, effective November 15, to strengthen financial institutions' liquidity management. Goldman Sachs analysts said the move signals the PBOC is increasingly uncomfortable with the yuan's rapid appreciation and could slow its near-term gains.
Latest updates
China Central Bank Raises Foreign Exchange Reserve Requirement to Curb Yuan Gains
The People's Bank of China announced on Tuesday that it will raise the reserve requirement ratio on foreign exchange deposits by 2 percentage points. The ratio will rise to 6 per cent, taking effect on November 15, according to a central bank statement. The PBOC said the move is intended to strengthen liquidity management at financial institutions. The policy requires banks to hold a larger share of their foreign currency deposits as reserves, which reduces the funds they can lend or deploy. The measure is aimed at easing upward pressure on the yuan.