China’s central bank raised the foreign exchange reserve requirement ratio for financial institutions from 4 percent to 6 percent on Sunday. The move is aimed at balancing supply and demand in the foreign exchange market and curbing self‑reinforcing expectations of renminbi appreciation.
The People’s Bank of China announced the increase on Nov 3. By reducing the amount of foreign currency available to banks, the higher reserve ratio is expected to ease upward pressure on the renminbi and keep its exchange rate stable at a reasonable and balanced level.
