FOREX-Yuan falls sharply due to policy change by the People’s Bank of China

FOREX-Yuan falls sharply due to policy change by the People's Bank of China

100 yuan banknote illustration, Beijing

© Reuters/Jason Lee
100 yuan banknote illustration, Beijing

By Elizabeth Howcroft

LONDON, Oct 12 (Reuters) – The yuan fell on Monday after the People’s Bank of China changed its policy of reserve requirements, an initiative seen as an attempt to slow the recent appreciation of the Asian giant’s currency, while the dollar index hovered near its three-week lows.

* Both the “onshore” and “offshore” yuan fell 0.8% against the dollar after the Chinese central bank said on Saturday that it will lower the reserve ratio requirement for financial institutions when they carry out some foreign exchange forwards operations. .

* The yuan hit a 17-month high on Friday in both internal and external trading. Since May it has gained about 6% against its US counterpart, thanks to a favorable differential performance between China and other large economies.

* On Monday, however, the “offshore” yuan was heading for its biggest daily slide against the dollar since March, changing hands at 6.7446 at 0921 GMT.

* “This is being interpreted as a subtle signal from the People’s Bank of China to restrict the speed of the yuan rise,” said RBC’s Alvin Tan.

* The dollar was stable after suffering its biggest loss in six weeks on Friday, when investors raised their bets that a fiscal stimulus package will be agreed to mitigate the economic impact of the COVID-19 pandemic.

* At 0927 GMT, the dollar index, which compares the greenback to a basket of six prominent currencies, was up 0.1% at 93.169, after almost completely reversing its late-September recovery.

* The euro was down 0.2% at $ 1.1803 and the yen was up 0.1% at 105.540 per dollar.

(Edited in Spanish by Carlos Serrano)


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