PBOC to curb yuan speculation, limit capital outflows, new FX forwards reserve requirement

The People's Bank of China  will mandate a deposit of 20 percent of sales to be held at zero interest and frozen for a year

• Effective October 15
• Aimed at preventing macro financial risks, and a step toward preventing capital outflows by increasing the cost of speculation in the forwards market

Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia

• "The PBOC hopes to limit the selling of yuan forwards on persistent depreciation expectations
• "But the depreciation pressures will remain as the real economy continues to slow"

Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong

• "My first impression is that this may drive a slight technical convergence in the onshore and offshore yuan curve from current levels
• "I am not sure more restrictions bring us closer toward financial market reform."

Bloomberg