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07:45 GMT · Markets wrap ›

China Raises FX Reserve Ratio to 6% to Slow Yuan

3 Nov 2026, 06:17

fercan.yalinkilic

PBOC lifts the foreign-exchange reserve requirement by two points to absorb dollar liquidity and curb the yuan’s five-percent rally.

MoneyTurkey Currencies Desk | 3 November 2026

Key points

The People’s Bank of China will raise the FX reserve requirement ratio from 4% to 6% on November 15, locking up an extra $24 billion in dollar reserves.
The onshore yuan weakened as much as 0.37% to 6.6728 per dollar after the announcement and is set for its largest one-day drop since May 15.

China’s central bank is tightening foreign-exchange liquidity rules to slow the yuan’s advance. The PBOC said it will lift the FX reserve requirement ratio by two percentage points to 6% from 4%, effective November 15. The move is expected to withdraw roughly $24 billion from the banking system. The onshore yuan fell as much as 0.37% to 6.6728 per dollar on the news.

What happened

The PBOC announced the change on Tuesday in a statement that cited the need to strengthen foreign-exchange liquidity management. The ratio determines how much dollar deposits banks must keep with the central bank. Raising it by two points will force institutions to lock up an additional 2% of their dollar holdings, reducing the supply of dollars available for conversion into yuan. The adjustment reverses the September 2023 cut that was used to stem yuan losses and capital outflows.

The onshore yuan weakened immediately after the statement. It touched 6.6728 per dollar, the weakest level since October 23, and is on course for its steepest daily decline in six months. The offshore yuan also slipped, with USD/CNH rising 0.3% to 6.6690. Asian currencies were mixed; the South Korean won rebounded 0.5% to 1,339.30 per dollar while the yen held near 157.88.

What is driving the currency

The yuan has gained more than 5% against the dollar this year, reaching its strongest level since 2022. The advance has been supported by robust exports, large trade surpluses and heavy corporate FX conversion. Analysts at MUFG said the PBOC is responding to strong market-driven appreciation and is trying to reduce the momentum behind one-way expectations. The central bank has also guided the daily midpoint weaker than market estimates for a second straight day, setting it at 6.7150 per dollar, 661 pips below a Reuters estimate.

PBOC Deputy Governor Zou Lan told a Hong Kong forum that China continues to let the market play a decisive role in exchange-rate formation. Market participants, however, said the reserve-ratio hike is unlikely to reverse the yuan’s upward trend. ANZ’s Zhaopeng Xing noted that corporate FX settlement has created excess supply over demand and that the two-point increase will not be enough to ease the imbalance.

Why it matters

A stronger yuan raises the price of Chinese exports and can weigh on the trade surplus that has supported the currency. The PBOC’s move signals discomfort with the pace of gains and shows willingness to use reserve requirements alongside daily midpoint guidance to manage appreciation. For traders, the adjustment tightens dollar liquidity inside China and may limit the scope for further sharp yuan appreciation in the near term.

The policy shift also highlights the tension between Beijing’s push for market-driven pricing and its desire to avoid excessive one-way moves. With the yuan still up more than 5% year-to-date and corporate conversion flows remaining heavy, the central bank has added another tool to slow the rally without resorting to outright intervention.