China reduced the amount of foreign-exchange deposits banks need to set aside as reserves for the second time this year to boost the yuan after the currency hit a two-year low, reports Bloomberg.
Financial institutions will need to hold 6% of their foreign-currency deposits in reserves starting from September 15, the People’s Bank of China said in a statement on Monday—lower than the current level of 8%. The move is expected to increase the supply of foreign currencies, thereby making it more appealing for traders to buy the yuan.
The yuan slid as concerns over monetary-policy tightening in the US and a deepening energy crisis in Europe bolstered the dollar. And while the string of stronger-than-expected PBOC fixings have slowed the yuan’s slide, banks including Goldman Sachs Group still expect it to fall to 7 per dollar as concerns over a COVID lockdowns in major Chinese cities and a sluggish property sector weigh on the economy.