China’s yuan has fallen by nearly 4 per cent against the US dollar this month, putting it on track for what could be its biggest drop since China unified exchange rates in 1994.
A move by the People’s Bank of China to cut the foreign exchange deposit reserve requirement ratio for banks next month is an attempt to slow down the depreciation of the yuan and reduce the incentive to hold onto the US dollar.
The People’s Bank of China (PBOC) said on Monday that it will cut the amount of foreign exchange deposits banks have to set aside by 1 percentage point to 8 per cent from May 15.
Investors have pulled money out of China on a huge scale since Russia invaded Ukraine in late February, even as flows to other emerging markets held up, the Institute of International Finance says.