China sets 20 percent reserve requirement on yuan forward settlement

World
Europe

00:23

To stabilize the yuan currency amid uncertainties, China’s central bank required banks to keep reserves equivalent to 20 percent of their clients' foreign exchange forwards positions from Monday, according to a statement released over the weekend.

The People's Bank of China (PBOC) said that the foreign exchange market showed some procyclical fluctuations due to factors such as trade frictions and changes in international exchange markets and the central bank would take counter-cyclical measures to keep foreign exchange markets stable.

The adjustment aims to ward off financial risks, promote the stable operation of financial institutions, and strengthen macro-prudential management.

The next step is to further monitor the foreign exchange market, take proper countercyclical measures and keep the RMB exchange rate generally stable within a reasonable range.

03:18

Some argued that Trump’s latest decision to raise tariffs on Chinese imports was an retaliation for the depreciation of the yuan against the dollar but Tangen stressed that the depreciation is not China’s move but made by market, said Einar Tangen, current affairs commentator.

“He can fight it as he wants, but the market always wins. This is one of the truisms if you’re involved in capitals, especially global market.” Tangen concluded.