China ups forex deposit reserve requirement ratio in bid to curb currency rally
China's central bank has directed financial institutions to hold more foreign exchange in reserve for a second time this year, with markets interpreting it as an attempt to slow down a recent rapid appreciation of the yuan.
China's central bank announced late on Thursday that it will raise the reserve requirement ratio for banks' foreign exchange deposits for the second time this year in Beijing's latest move to curb the yuan's rally against the US dollar.
The People's Bank of China (PBOC) said it will increase the ratio from 7 per cent to 9 per cent from Wednesday next week "to strengthen foreign exchange liquidity management of financial institutions".
China's central bank announced late on Thursday that it will raise the reserve requirement ratio for banks' foreign exchange deposits for the second time this year in Beijing's latest move to curb the yuan's rally against the US dollar.
The People's Bank of China (PBOC) said it will increase the ratio from 7 per cent to 9 per cent from Wednesday next week "to strengthen foreign exchange liquidity management of financial institutions".
The move comes amid the yuan's recent strong gains against the US dollar, with the exchange rates for both onshore and offshore markets hitting their firmest levels in more than three and half years on Wednesday.
In an attempt to tame market sentiment on a firmer yuan, the official said on Thursday that the two-way volatility in the yuan has not changed and the recent rally is not sustainable once the seasonal factor and end of year transaction demand fades.
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