The People’s Bank of China announced yesterday to cut the foreign exchange reserve requirement ratio (RRR) to 6% from 8% beginning September 15. That is, the amount of foreign-exchange deposits banks need to set aside as reserves will be lowered, freeing up funds to buy Yuan.
The move, together with a string of stronger-than expected exchange rate fixings, are seen as a strong signal on PBoC’s stance to at least slow Yuan’s depreciation. That came when Yuan hit fresh two-year low and with USD/CNH approaching psychological important 7 handle.
But USD/CNH’s rally (Yuan’s depreciation) is continuing. There is no sign of topping in USD/CNH as long as 6.8877 support holds, technically. It’s still on track to 61.8% projection of 6.3057 to 6.8372 from 6.7159 at 7.0444.
