Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Yuan Tumbles After China Hikes FX Reserve Ratio

Courtesy of ZeroHedge View original post here.

Less than a week after the US Treasury issued a report criticizing China's lack of transparency on the yuan (and its interventions), Beijing has 'intervened' more directly in a move forcing banks to hold more foreign currencies in reserve.

Financial institutions will need to hold 9% of their foreign exchange in reserve from Dec. 15, the central bank said in a statement Thursday evening Beijing time, a 2 percentage point increase.

Bloomberg reports that earlier in the day, the People’s Bank of China had signaled a limit to its tolerance for the recent advances by setting its reference rate at a weaker-than-expected level.

The move, which the PBOC said will help liquidity management, effectively reduces the supply of dollars and other currencies onshore. This implicitly puts pressure on the yuan to weaken and that is what it has done overnight…

Source: Bloomberg

The increase is the second rise this year, after the central bank hiked the ratio by 2 percentage points in June, the first increase since 2007.

Source: Bloomberg

Interestingly, the FX RRR hike comes at a level that twice in the last 10 years has been associated with a significant regime shift in the yuan (devaluations).

How would US equity markets cope with a suddenly surging USD and the implicit increase in volatility that has been associated with past interventions at these levels by Beijing.


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!