China's Central Bank Tweaks Forex Reserve Rules to Steady Yuan
China's central bank moved to stabilize the yuan by draining dollar liquidity domestically, after the Chinese currency strengthened to a multi-year high against the greenback.
The People's Bank of China said Tuesday that it would hike the foreign-exchange reserve requirement ratio for financial institutions by 2 percentage points to 6%.
The PBOC has sent a clear message to the market that it is concerned about the fast appreciation of the yuan, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
"China's economy heavily depends on exports. A moderate appreciation may be tolerated, but the speed in October likely raised concerns in [policy circles]," Zhang said.
The decision, which takes effect on Nov. 15, is aimed at improving the management of foreign-exchange liquidity, the central bank said in a statement.
The move will require Chinese financial institutions to lock up an additional 2% of their foreign-currency deposits with the central bank, tightening dollar liquidity in domestic markets and helping cool the yuan's appreciation.
Beijing has come under pressure from major trading partners to let the yuan strengthen rapidly in a bid to help rebalance trade surpluses by making Chinese exports less competitive. But Chinese policymakers have signalled a preference for mild, gradual appreciation.
The yuan weakened against the greenback in the wake of Tuesday's announcement. In offshore trading, the dollar was last up 0.3% at 6.6639 yuan after touching 6.6666 yuan.
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(END) Dow Jones Newswires
November 02, 2026 20:44 ET (01:44 GMT)
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