MNI BRIEF: PBOC Cuts FX RRR To Shore Up the Yuan

The People's Bank of China cut the FX reserve requirement ratio for banks on Friday to help support the yuan which has weakened over recent months.

The central bank reduced the FX RRR by 200bp from 6-4%, the first cut since Sept 2022, making it effective from Sept 15th. The PBOC said it would “improve financial institutions' capacity to use foreign funds."

Analysts estimate the cut will effectively boost CNY together with the latest moves of shoring up the property market to improve market sentiment. The offshore yuan jumped over 350pips to 7.2426 after the news. (See MNI: Yuan Seen As High As 7.0 After PBOC, Politburo Moves)

MNI, citing advisors, reported that the PBOC may cut Forex RRR should the yuan experience any sharp one-way drop (See MNI: PBOC Faces Tough Task To Defend Yuan, Advisors Say).