MNI BRIEF: PBOC To Raise Key Parameter For Shoring Up Yuan
MNI (BEIJING) - The People’s Bank of China raised a key parameter to unlock more foreign debt finance and encourage capital inflow on Monday to shore up the yuan.
According to the PBOC’s website, the Bank will work with the State Administration of Foreign Exchange, to raise the macro-prudential adjustment parameter for cross-border financing by enterprises and financial institutions from 1.5 to 1.75, effective Jan 13.
The Bank last raised the parameter to 1.5 from 1.25 on July 20, 2023 when the yuan weakened against the dollar.
Meanwhile, the Bank also reiterated its stance of supporting the yuan at a reasonable and balanced level in a recent meeting, according to a statement on its website on Monday.
The PBOC will continue to adopt comprehensive measures to stabilise expectations, strengthen market management, correct pro-cyclical behaviour, address actions that disrupt market order, and resolutely prevent the risk of exchange rate overshooting, the meeting noted.
Both onshore and offshore yuan rallied amid the news, with USDCNH dropping over 80pips.
The Bank will continue to take measure to stabilise the yuan, but any worsening in trade tensions with the U.S. over the rest of the year would be likely to prompt a steady but gradual depreciation of the currency, MNI reported recently. (See MNI: PBOC Underpinning Yuan, But US Tariffs Key - Advisors)