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SHANGHAI -China’s central bank said on Monday it will cut the amount of foreign exchange reserves that financial institutions must hold, a move seen as aimed at slowing the yuan’s recent depreciation.
The People’s Bank of China said it would cut the foreign exchange reserve requirement ratio (RRR) to 6 percent from 8 percent beginning Sept. 15, according to an online statement.
The PBOC said the reduction aimed to improve “financial institutions’ ability to use foreign exchange capital,” the statement added.
The move came after the Chinese yuan’s recent slide to two-year lows. The yuan has depreciated by 8% against the dollar in the year to date, as a result of broad dollar strength in global markets and China’s worsening economic slowdown.
The reduction in reserve requirements would boost dollar liquidity. Based on end July data, when foreign exchange reserves stood at $953.
