Offshore Yuan Falls After PBOC Raises FX Reserve Ratio to Curb Rally
· Business · Bloomberg, Economic Times
The offshore yuan dropped to 7.13 per dollar, heading for its first decline in almost three weeks after the People's Bank of China said it will raise the foreign-exchange reserve requirement ratio to 1.5% from zero starting Nov. 15. The move forces banks to hold more foreign currency in reserve, effectively reducing the supply of dollars in the onshore market and making it costlier to bet on yuan strength. The Chinese currency had gained about 2.5% since late September on expectations of more stimulus and a weaker dollar. Traders said the PBOC's step signals discomfort with the pace of appreciation and a desire to keep export competitiveness intact. The central bank has used the same tool several times since 2022 to manage rapid yuan moves in either direction. No immediate comment was available from the PBOC on whether further measures are planned.
Why it matters
A weaker yuan supports Chinese exporters but adds to capital-outflow pressures and complicates monetary easing. Indian markets watch the yuan closely because a sustained depreciation can hurt rupee sentiment and widen the trade deficit with China.
Read the original report — Bloomberg
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