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Bloomberg
China’s central bank will effectively remove a reserve requirement for trading foreign currency forwards—a move that may slow the pace of yuan appreciation after its biggest two-week surge in at least a decade— according to people familiar with the matter.
Effective September 11, the People’s Bank of China will stop requiring financial institutions to set aside cash when buying dollars for clients through currency forwards, the people said, asking not to be identified because they aren’t authorised to speak on the matter in public. The ratio is currently set at 20 percent. The PBOC didn’t immediately reply to a fax seeking comment after usual working hours.
Chinese authorities put the rule in place in October 2015 in a move seen as an effort to restrict dollar purchases when the yuan was weakening. A removal would make it easier for traders to buy the US currency, reducing pressure for yuan appreciation. The Chinese exchange rate has rallied close to 5 percent over the past three months amid speculation policy makers will buoy the exchange rate in the run-up to a key Communist Party meeting on October 18. That Asia-beating surge has now prompted talk the PBOC may try and slow the advance.