PBOC Removes FX Risk Reserves to Slow Rapid Yuan Gains
China will scrap risk reserves for FX forwards to slow the yuan's rally. The move encourages dollar buying after the currency hit a near three-year high.
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China has moved to temper the rapid appreciation of its currency by scrapping foreign exchange risk reserves for certain forward contracts. The People's Bank of China (PBOC) announced on Friday that it would lower the reserve requirement for financial institutions from 20% to zero, effective March 2. This strategic shift is designed to encourage dollar buying and follows a period where the yuan reached a near three-year peak against the currency of the United States.
