The yuan’s value went down while greenback grew as investors reacted to the PBOC’s easing of the monetary policy.
The central bank announced on Sunday that the required reserve ratio (RRR) for some cash lenders had been reduced by 1%.
According to the central bank’s website this resolution will come into effect on October 15.
This reserve ratio cut should release 1.2 trillion yuan, whereof 450 billion yuan is to repay existing medium-term financial liabilities.
“We are not surprised to see the RRR cut given mounting economic growth pressure, sizable seasonal liquidity demand, and weak investor sentiments,” Jerry Peng, a strategist at Citigroup in Hong Kong, said. “We reckon the authorities will step up intervention to support RMB in view of the RRR cut. Overall, we believe the RRR cut should be regarded as a positive move.”
