Foreign Currency Reference Rate Raised Since 2007... Indication of Market Intervention
[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese financial authorities have raised the foreign currency reserve requirement ratio for banks and other financial institutions from the current 5% to 7%, an increase of 2 percentage points.
The People's Bank of China, the central bank, announced on the 31st of last month that the foreign currency reserve requirement ratio for banks and other financial institutions will be increased starting June 15. This measure is interpreted as an effort to prevent the yuan from strengthening against the dollar.
The value of the yuan against the dollar has sharply declined since April due to appreciation. Concerns have arisen across China that the yuan's strength is hurting the profitability of export companies.
The last time the People's Bank of China adjusted the foreign currency reserve requirement ratio was in 2007, when it was raised from 4% to 5%. This recent increase in the reserve ratio is interpreted as a sign that Chinese financial authorities are willing to intervene in the market if necessary.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
