Central Bank of China raises the reserve ratio for foreign exchange forwards by 20% to stabilize the yuan

The People’s Bank of China (PBOC, the country’s central bank) is raising the reserve requirement for forward foreign exchange transactions to 20% from zero. The changes will come into force on September 28, the NBK said in a statement.

The move should help the NBK stabilize the yuan, which is at its lowest level in more than 2 years against the US dollar, The Wall Street Journal notes.

The NBK said in a statement that it thus hopes to “stabilize expectations in the foreign exchange market and strengthen macroprudential regulation.”

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This month, the dollar rose above the 7 yuan mark for the first time since 2020. On Monday, the pair is trading at 7.1641 yuan/$1, compared to 7.1284 yuan/$1 at the close of the previous session.

The last time the NBK raised the reserve requirement for foreign currency forwards to 20% from zero was in 2018.

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