PBoC: 20% reserve requirement on Banks removed - TDS

The PBoC has removed a 20% reserve requirement imposed on Banks looking to purchase USDs via forwards, notes the analysis team at TDS.

Key Quotes

“This requirement was implemented in Oct 2015 when Chinese authorities were trying to curb speculative positions and outflow. The removal of this rule suggests Chinese authorities may have been uncomfortable with recent yuan gains, the move a prelude to authorities feeling more comfortable with two way trade.”

“Over the weekend China CPI and PPI data was released for Aug. CPI +1.8% and PPI +6.3% both exceeded expectations for advances of +1.6% and 5.7% respectively.”