French.china.org.cn| Updated on 05-09-2022
China’s central bank announced on Monday that it will cut the reserve requirement ratio for foreign currency deposits for financial institutions by two percentage points, starting Sept. 15.
The reserve requirement ratio will be cut to 6% from the current 8%, the People’s Bank of China said in a brief statement posted on its website.
This measure aims to improve “the ability of financial institutions to use capital in foreign currencies”, according to the press release.
“The reduction will help increase the liquidity of the US dollar in the market and contribute to the stability of the renminbi exchange rate,” said Wen Bin, chief economist of Minsheng Bank of China.
Due to the accelerated tightening of monetary policy by the US Federal Reserve, the US dollar index once broke through the 110 mark, which led to a passive depreciation of the renminbi once morest the US dollar.
“The central bank’s decision sends a positive signal to the market, which is conducive to stabilizing renminbi exchange rate expectations and avoiding an irrational overshoot,” Wen said.
The central bank last cut the foreign exchange reserve requirement rate in May, cutting it by one percentage point. F
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