Forex Rule Adjusted
The PBC scrapped the reserve requirement for forward forex trading, which was 20 percent, on October 12.
The move was made as the country’s foreign exchange market operation has remained stable with balanced market supply and demand since the start of this year, PBC said in an online statement.
The exchange rate of the renminbi, or the yuan, has maintained two-way fluctuations based on market supply and demand, and demonstrated greater flexibility, according to PBC.
“China has seen stable market expectations and orderly flows of cross-border capital so far this year,” it said.
“The adjustment will help the exchange rate of the yuan against the U.S. dollar remain at a reasonable equilibrium level,” Wen Bin, chief analyst at China Minsheng Bank, said, adding that the currency has recently seen significant appreciation amid improving economic fundamentals of the country.
Wen said the adjustment can also help banks reduce the cost of forward forex trading and increase demand of this product among enterprises, so as to better use derivatives to manage exchange rate risks.