In a bold move to curb the renminbi’s surge, China’s financial institutions were ordered to hold more foreign currencies in reserve for the first time in over ten years, reported Bloomberg.
According to a statement from the People’s Bank of China, banks will need to hold 7% of their foreign currencies in reserve starting June 15 in order to maintain liquidity control and decrease RMB’s appreciation.
With the rise of foreign exchange in reserve, the central bank plans to reduce the supply of currencies onshore including the supply of dollars.