China Central Bank Adopts Measures To Safeguard Yuan
China’s central bank ramped up measures to safeguard the yuan from further depreciation on Monday as the U.S. Dollar continued to strengthen on the Federal Reserve’s tightening stance.
The People’s Bank of China decided to raise the risk reserve requirement for banks’ forward forex sales to 20 percent from zero. The new rate will take effect on September 28.
This foreign exchange risk reserves for financial institutions when buying forex through currency forwards were lowered to zero in October 2020.
The PBoC had set the central parity rate of the renminbi at 7.0298 per dollar on Monday, the weakest since mid-2020. The currency is allowed to move within the range of 2 percent above or below the central parity each trading day in the spot market.
Despite the announcement on reserve requirement for forward forex trade, the currency ended the session weaker today, at 7.1464 per dollar.
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