China acts to rein in yuan slump, set to raise FX risk reserve ratio to 20%

SHANGHAI -China’s central bank on Monday announced fresh steps to slow the pace of theyuan’s recent depreciation by making it more expensive to bet against the currency, as global policymakers grappled with the economic effects of a broad dollar rally.

The People’s Bank ofChina(PBOC) said it wouldraisethe foreign exchangeriskreserves for financial institutions when purchasingFXthrough currency forwards to 20 percent from the current zero, starting on Sept. 28, to “stabilizeFXmarket expectations and strengthen macro prudential management.”

The move to resumeFXriskreserves would effectivelyraisethe cost of shorting theyuanat a time the local currency is facing renewed depreciation pr…

Keep on reading: China acts to rein in yuan slump, set to raise FX risk reserve ratio to 20%