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PBOC Fx Reserve Ratio Cut Not Significant: CICC

MNI (Singapore)

The PBOC's announcement on Monday raising financial institutions' FX reserve requirement ratios to 7% from 5% will tighten U.S. dollar supply in the domestic Fx market by about USD20 billion, not a large amount considering the average daily trading volume in the market was around USD41.1 billion last week, CICC said in a report. The move conveyed the PBOC's intention to maintain two-way fluctuations of the yuan. Judging from previous moves to reduce the expectation for yuan's gain, it may weaken 0.1-0.4% against the dollar within a week after the policy's introduction, the report said. As of April, the balance of foreign exchange deposits in financial institutions is approximately US$1 trillion, the report added.

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