The central bank took action - lowered the foreign exchange deposit margin ratio for the first time
According to the central bank's official website, in order to improve the ability of financial institutions to use foreign exchange funds, the People's Bank of China decided to reduce the foreign exchange reserve ratio of financial institutions by 1 percentage point starting May 15, 2022, that is, the foreign exchange reserve ratio from the current 9% to 8%.
What is a foreign exchange reserve?
Foreign exchange deposit reserves mean that financial institutions deposit a certain percentage of the foreign exchange deposits absorbed by them with the People's Bank of China in accordance with regulations. The foreign exchange reserve ratio refers to the ratio of foreign exchange deposit reserves deposited by financial institutions with the People's Bank of China and their absorption of foreign exchange deposits.
Historically, China's foreign exchange reserve ratio has been adjusted several times. This reduction is the first time since this year that the foreign exchange reserve ratio has been lowered. The foreign exchange reserve ratio within this year
As of the end of March, the balance of foreign currency deposits was US$1.05 trillion. Lowering the foreign exchange reserve ratio from the current 9% to 8% means that reserves deposited by financial institutions with the central bank from June 15 can be reduced by a total of 10 billion US dollars.
Experts analyzed, “Lowering the foreign exchange reserve ratio of financial institutions can increase the capital supply of financial institutions for foreign exchange loans, which is conducive to stabilizing the RMB exchange rate.”
Recently, the RMB continued to depreciate. From April 18 to April 25, the maximum cumulative depreciation of the onshore RMB exceeded 2,100 points.
However, as soon as the above news was released, the exchange rate of the onshore RMB against the US dollar quickly rose from around 6.57 to 6.54. The offshore RMB was short against the US dollar...