China tightens CNH liquidity aiming to stabilize Yuan- ANZ
By FXStreet FXStreet (Bali) – A few days ago, the PBOC announced reserve requirement ratios for overseas banks’ RMB deposits placed onshore, with ANZ Research Team noting that while the longer term aim is to establish a mechanism for the PBoC to manage liquidity, the near-term objective is to tighten liquidity and deter speculative positions in CNH.
Key Quotes
“The normalising of the RR ratio is aimed at establishing a long-term mechanism for the PBoC to manage CNH liquidity. It is different from the current market-talked ad-hoc administrative methods (such as suspending domestic banks providing RMB liquidity to offshore banks).”
“However, we believe that part of the authorities’ reasoning for introducing it now is to tighten the CNH liquidity and push up CNH interest rates to make it more expensive to short the currency.”
“Following the depreciation pressure in the early part of the year, the authorities have been seeking to stabilise the RMB via setting stronger and stable fixings, intervening in the offshore market and re-iterating yuan stability.”
“As we noted in our research note last week, we suspect that the authorities are using the same playbook as the post-August devaluation period in an attempt to stabilise the currency.”
“The measure fits nicely with this playbook, recalling …read more
Source:: FX Street
