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China’s yuan touched a 28-month low against the dollar on Monday, only steps away from its downside trading limit, despite the central bank taking steps to rein in the currency’s weakness.
The People’s Bank of China (PBOC) said it would raise the foreign exchange risk reserves for financial institutions when purchasing FX through currency forwards to 20 percent from the current zero, starting on Sept. 28.
The announcement, along with another firmer-than-expected daily midpoint fixing, was meant to slow the pace of yuan depreciation by making it more expensive to bet against the currency, traders said.
“This could stem further forward positions that have been negative for the yuan and slow its depreciation pace,” analysts at Maybank said in a note.
Prior to market opening, the PBOC set the midpoint rate at 7.
