PBoC acts to rein in renminbi depreciation

Financial institutions now have to set aside 20% of the value of currency forwards traded on behalf of their clients

The People’s Bank of China has reimposed reserve requirements on foreign exchange forwards trading in a bid to shore up the weakening Chinese renminbi.

Starting from August 6, financial institutions have to set aside 20% of the trade value when they buy or sell foreign exchange to clients via currency forwards, which are usually denominated in US dollars. This requirement increases the cost for both banks and corporates to short-sell yuan.

The PBoC said the move is designed to “prevent macro

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