PBOC reintroduces FX forwards reserve ration to halt rapid yuan depreciation

The People's Bank of China (PBOC) will set a reserve requirement ratio of 20 percent for the financial institutions settling foreign exchange forward yuan positions, according to Reuters News.

The move is set to go into effect today and is aimed at discouraging dollar purchases. As a result, the Chinese yuan (CNY) may find a floor for the short-term, having dropped 8 percent in the past six weeks amid the Sino-US trade tensions.

The news first hit the wires on Friday and put a bid under the CNY. The USD/CNY pair (onshore exchange rate) dropped from 6.8926 to 6.8309 on Friday.