China looks to prop up yuan as it heads for a record losing streak

China’s
Central Bank Governor Yi Gang delivers a speech at the China
Development Forum at the Diaoyutai State Guesthouse in Beijing,
Sunday, March 25, 2018. Yi outlined sweeping plans Sunday to rein
in rising debt and financial risk, but expressed confidence that
Beijing can prevent potential dangers.
AP/Emily Wang

• China announced it will raise its reserve requirement
  ratio on some foreign exchange forwards.
• The Chinese yuan has slid to its lowest level in more
  than a year.
• 
  
  Watch the yuan trade in real time here.
  

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As the yuan heads for its longest weekly losing streak since its
market exchange rate began in 1994, China’s central bank
announced Friday it will raise the amount of cash required to set
aside when buying dollars through currency forwards.

The People’s Bank of China will raise its reserve requirement
ratio to 20% on some foreign currency forward contracts, it said
in a statement. The central bank removed the requirement
completely last September after the yuan saw its largest two-week
appreciation in nearly a decade. 

The move will essentially make it more expensive to short the
yuan, which has consistently weakened in recent months. It has
shed more than 7% versus the dollar since June, bringing it to a
15-month low earlier Friday.

Amid an ongoing
trade war between Beijing and Washington, the weakening has
raised questions about how comfortable Beijing is with letting
the currency fall and drawn comparisons to 2015 when

a sudden yuan devaluation roiled global markets. 

The government announced last month it would pursue tax
cuts and other expansionary measures, spurring expectations for
loosening monetary policy. It has cut its reserve
requirement ratio, or the amount of money commercial banks have
to store, three times this year.

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