China's central bank raises forex reserve requirement ratio to 6% amid yuan's gains; move could help curb excessive market swing: expert - Global Times

China's central bank raised the foreign exchange reserve requirement ratio for financial institutions to 6%, according to the Global Times, a move that comes as the yuan has been strengthening. The ratio sets how much of a bank's foreign exchange deposits must be held in reserve rather than deployed, so lifting it reduces the amount of foreign currency that institutions can lend or recycle into the market.

The timing is notable. When the yuan appreciates, authorities have historically used this tool to lean against one-sided moves rather than to set a target for the currency. An expert quoted by the Global Times said the adjustment could help curb excessive market swings, framing it as a stabilisation measure rather than a change in the broader policy stance.

For market participants, the signal matters more than the mechanical effect. The move suggests a preference for two-way fluctuation in the yuan and a willingness to use macro-prudential tools when price action becomes stretched. What to watch: subsequent fixings, the pace of the currency's moves, and whether further reserve-ratio adjustments follow.