China Cuts Forex Reserve Ratio in Bid to Support Tumbling Yuan

Banks will need to hold 6% of their foreign currency deposits in reserves. Photo: Bloomberg

(Bloomberg) — China reduced the amount of foreign-exchange deposits banks need to set aside as reserves for the second time this year to boost the yuan after the currency hit a two-year low.

Financial institutions will need to hold 6% of their foreign currency deposits in reserves starting from Sept. 15, the People’s Bank of China said in a statement on Monday — lower than the current level of 8%. The move is expected to increase the supply of foreign currencies, thereby making it more appealing for traders to buy the yuan.