China’s central bank raised the foreign-exchange reserve requirement ratio for the first time in five years, triggering an immediate slide in the yuan.
MoneyTurkey Foreign Markets Desk | 4 November 2026
Key points
- PBOC lifted the FX deposit reserve ratio from 4% to 6%, its first increase since 2021.
- The yuan weakened more than 300 pips on the day, while the offshore yuan fell over 280 pips.
The People’s Bank of China raised the foreign-exchange reserve requirement ratio from 4% to 6%, the first hike in five years. The move is explicitly aimed at curbing one-sided RMB appreciation expectations. The yuan weakened more than 300 pips on the day, while the offshore yuan fell over 280 pips.
What happened
Caixin reported that the PBOC lifted the FX deposit reserve ratio to 6% from 4%. The last adjustment occurred five years ago. The central bank said the step was taken to curb one-sided RMB appreciation expectations.
The onshore yuan fell more than 300 pips on the day. The offshore yuan dropped over 280 pips. The USD/CNY reference rate was set at 6.7150, up from 6.7146.
Why markets care
The surprise tightening of FX policy raises funding costs for banks holding foreign currency. Higher reserve requirements reduce liquidity available for lending and trading. The desk note expects the move to weigh on the CSI 300 and Shanghai Composite indices.
The higher reserve ratio is also likely to push CGB 10y yields modestly higher. Reduced liquidity in the FX market can support the CNY over time, but the immediate price action was a sharp depreciation.
Local context
The ratio applies to foreign-currency deposits held by financial institutions in China. The policy change marks the first upward adjustment since the PBOC last cut the ratio five years ago. Caixin noted that the move comes amid recent strength in the Chinese yuan.
Financial News reported the hike in Korean media as a response to RMB strength. The central bank’s action aligns with its stated goal of managing expectations around the currency’s appreciation.
What to watch
- Daily PBOC FX reserve ratio announcements
- USD/CNY reference rate movements
- CSI 300 and Shanghai Composite intraday swings
- CGB 10y yield changes
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Sources
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