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China Cuts FX Reserve Requirement Ratio To 4%

CNY

Headlines have crossed that the PBoC has cut the forex reserve requirement ratio by 2ppts. This will take effect from September 15 and takes the ratio to 4% from the current 6%. Essentially the move should boost the amount of foreign currency in the local market, thereby raising the appeal of holding the yuan. USD/CNH has gapped lower on the announcement, falling by 0.30% to fresh lows of 7.2520/30 at the time of writing.

  • The move shouldn't come as a huge surprise to the market. The authorities have stated they will use the full tool kit to guard against depreciation pressures. The ratio was last cut in September last year.

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