Central bank tightens foreign-exchange liquidity for the first time in nearly five years after the yuan slips past 6.65.
MoneyTurkey Foreign Markets Desk | 3 November 2026
Key points
- PBOC lifted the foreign-exchange reserve requirement ratio to 6% from 4% after the yuan broke 6.65.
- The move is the first hike in the ratio in nearly five years and aims to curb depreciation pressures.
China’s central bank raised the foreign-exchange reserve requirement ratio to 6% from 4% after the yuan moved past 6.65. The step, the first increase in nearly five years, is intended to tighten liquidity in the FX market and ease downward pressure on the currency. Offshore yuan quotes weakened after the announcement, while USD/CNY moved lower.
What happened
The People’s Bank of China announced the increase in the FX reserve ratio on 3 November. The ratio applies to banks’ foreign-currency deposits and had stood at 4% since the last adjustment almost five years ago. Caixin reported the change followed the yuan’s breach of the 6.65 level against the dollar.
The central bank also set the USD/CNY central parity rate at 6.7150, above the 6.6489 level that market participants had estimated. Bloomberg noted that offshore yuan quotes weakened after the move, reversing part of the earlier strength.
Why markets care
The higher reserve ratio reduces the amount of foreign currency banks can lend, tightening liquidity in the FX market. This mechanism supports the yuan and is expected to limit downside moves in the CSI 300 and Shanghai Composite indices. At the same time, the tighter liquidity puts downward pressure on USD/CNY.
Financial News, reporting in Korean, highlighted that the ratio had not been raised since the previous cycle and that the step came amid renewed strength in the yuan. The announcement therefore resets market expectations for near-term FX policy settings.
Local context
The PBOC uses the FX reserve ratio as a macro-prudential tool to manage cross-border capital flows and currency volatility. By lifting the ratio, the bank increases the cost for banks to hold net long foreign-currency positions, which can dampen speculative pressure on the yuan.
Caixin noted that the move follows recent depreciation pressure on the currency and is aimed at curbing further downside. The report did not provide additional details on future adjustments or on any accompanying changes to other policy instruments.
What to watch
- Next PBOC daily USD/CNY fixing versus 6.7150 level
- Offshore CNH forward points for signs of renewed pressure
- CSI 300 and Shanghai Composite turnover after the ratio hike
- Any follow-up comments from PBOC officials on further ratio moves
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Sources
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- Bloomberg.com: https://news.google.com/rss/articles/CBMisgFBVV95cUxQZVdSMnhjS2dEckEzRDNTTDhEcE03WU4zUTJHMmk4dUZ4LWtnbDVROGx0UnRoVmFiTHBUN3BfU2hPai0tektpZkZscDFhWkw0SzlNdURnYlRrQzBreldyMDQ0TTk3anpjaWFRWFpobUZvclNRMWlQbGZidDZHd1NVVjFwVkVaSXBNZklvLURUdE1sWHFUbzBBM0dlaTE1VkFyZDhKVlBNOUxNNUlscUxCdk53?oc=5
- 파이낸셜뉴스: https://news.google.com/rss/articles/CBMiWEFVX3lxTE44d3BnWWJJc0V1WndLYmQ4T202U3RJY3VITUpjUkE0UmJVOXJwRDVuQ2VSUEszTDVjS0Vmem1yYXRYbjI4Z1RGQVdkd2pEUl9lTWR3RUNmQlM?oc=5
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