Tuesday, 1 September 2015

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."

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