PBoC Raises FX Reserve Ratio to Curb Rapid Yuan Appreciation
On.cc · 4 SOURCESabout 3 hours ago2 MIN
Summary
The People's Bank of China (PBoC) raised the foreign exchange deposit reserve requirement ratio by two percentage points on November 3, 2026, in a coordinated effort to prevent one-way appreciation of the yuan and guide the exchange rate toward two-way fluctuation . The policy move, announced amid year-end seasonal pressures, aims to tighten dollar liquidity and slow the yuan's rapid appreciation trajectory. The offshore yuan immediately weakened to 6.6616 per dollar following the announcement, with the Hong Kong dollar trading at 84.84 yuan per HK$100 . The yuan's central parity rate had been lowered by 8 basis points to 6.7146 on November 2 before the policy intervention .
Key Points
- PBoC raised the foreign exchange deposit reserve requirement ratio by two percentage points on November 3, expected to withdraw approximately 240 billion US dollars from the banking system
- The offshore yuan (CNH) fell short-term to 6.6616 per dollar, a decline of 168 basis points, after the policy announcement
- The yuan's central parity rate stood at 6.7146 on November 2 (down 8 basis points), adjusted further to 6.7150 on November 3 (down 4 basis points), and settled at 6.718 on November 4 (down 30 basis points)
- The Hong Kong dollar traded at 84.76 yuan per HK$100 on November 2, weakening to 84.84 on November 3 and 84.96 on November 4
- China's trade surplus reached 938.1 billion US dollars in the first three quarters of 2026, with strong exports and seasonal year-end concentrated settlement driving yuan appreciation
Why It Matters
The PBoC's decisive policy intervention demonstrates Beijing's commitment to maintaining exchange rate stability amid mounting appreciation pressures . For Hong Kong businesses and investors, the yuan's managed appreciation trajectory affects cross-border trade profitability and investment returns, as the region maintains strong economic ties with the mainland . The policy also signals that authorities are prepared to use counter-cyclical tools proactively to prevent speculative one-way bets on the yuan, protecting enterprises from exchange rate volatility risks .
The PBoC's decisive policy intervention demonstrates Beijing's commitment to maintaining exchange rate stability amid mounting appreciation pressures . For Hong Kong businesses and investors, the yuan's managed appreciation trajectory affects cross-border trade profitability and investment returns, as the region maintains strong economic ties with the mainland . The policy also signals that authorities are prepared to use counter-cyclical tools proactively to prevent speculative one-way bets on the yuan, protecting enterprises from exchange rate volatility risks .