China C.Bank Says To Raise FX Reserve Requirements

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China’s central bank said on Monday that it will raise the FX reserve requirement ratio for financial institutions to 7% from 5%, effective on June 15.

The People’s Bank of China (PBOC) said the move was meant to “strengthen FX liquidity management at financial institutions”, according to a statement published on its website.

That rise in reserve requirements would make it more expensive for banks to hold dollars and other foreign currencies. Dollar/yuan swap points fell to price indicating a firmer yuan in the near term as market participants braced for companies and banks to reduce dollar holdings.

As per latest data, banks in China hold about $1 trillion in foreign currency deposits.

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The last time the PBOC raised the reserve requirement was in 2007, from 3%.

– Reuters

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