Today we learned from multiple reports emanating from the People’s Bank of China (PBoC) that the Chinese central bank is going to place a reserve requirement on offshore renminbi, still mostly traded through Hong Kong banks.
The move could be aimed at discouraging speculators that continue to bet that the CNH – offshore yuan could go lower. This all is coming after China has been aggressive in the new year so far in setting the RMB fix lower on the onshore yuan – known as CNY against the USD.
Sources told Reuters on Sunday night that the People’s Bank of China (PBoC) was preparing to raise the ratio, currently at zero, for deposits placed in yuan clearing banks. The PBoC today confirmed such a move, to be effective starting on Jan. 25th.
Per reports the central bank made no mention of increasing any other restrictions on banks in its statement. A senior trader at a Chinese commercial bank in Shanghai said the decision has limited impact on the onshore market, yet it implied that the government has become more determined to keep the yuan relatively stable for now, hence the Chinese currency would have limited potential to depreciate sharply again in the foreseeable future.
With great foresight, one Forex broker who has taken preventative measures from any sort of renminbi shocks is Swiss brokerage house Dukascopy, the brokerage last week cut leverage on USD/CNH trading to 10:1 as reported by LeapRate.