China encourages dollar buying to slow yuan ascent
#China yuan #dollar buying #yuan appreciation #PBOC #foreign exchange reserves #currency forwards #exchange rate
📌 Key Takeaways
- China's central bank scrapped foreign exchange risk reserves for forward contracts to encourage dollar buying
- The yuan reached a near three-year high against the U.S. dollar driven by exporters selling dollars
- The policy reverses a September 2022 decision to raise risk reserve requirements
- The yuan recorded its strongest annual performance against the dollar since 2020 last year
📖 Full Retelling
China's central bank announced in Beijing on February 27, 2026, that it would scrap foreign exchange risk reserves for some forward contracts to encourage dollar buying and slow the rapid appreciation of the yuan, which had reached a near three-year high against the U.S. dollar driven by exporters selling dollars following last year's record trade surplus. The People's Bank of China (PBOC) stated it would lower the foreign exchange risk reserves for financial institutions when purchasing foreign exchange through currency forwards to zero from 20%, effective March 2. This policy reversal comes after the yuan strengthened significantly against the dollar, with the offshore yuan weakening approximately 0.2% following the announcement. Analysts viewed the move as unexpected intervention by the central bank to curb what they perceived as too rapid currency appreciation. The decision reverses the PBOC's September 2022 measure to raise risk reserve requirements aimed at stemming yuan losses and capital outflows. The central bank explained the policy change was designed to 'support enterprises in managing exchange rate risks' while maintaining the basic stability of the renminbi exchange rate at a 'reasonable and balanced level.' Market analysts suggested the move would release pent-up demand for dollar purchases through forwards, helping balance market supply and demand while indicating the PBOC sees little risk of further yuan depreciation.
🏷️ Themes
Currency policy, Exchange rate management, Economic intervention
📚 Related People & Topics
People's Bank of China
Central bank of the People's Republic of China
The People's Bank of China (officially PBC and unofficially PBOC) is the central bank of the People's Republic of China. It is responsible for carrying out monetary policy as determined by the PRC People's Bank Law and the PRC Commercial Bank Law. The PBC was established in 1948 as the bank serving ...
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try{ var _=i o; . if(!_||_&&typeof _==="object"&&_.expiry Netflix declines to match Paramount Skydance bid for Warner Bros Dorsey’s Block slashes workforce 40% to embrace AI-native future, shares gain This is where Deutsche Bank sees silver prices ending the year Gold prices mixed as U.S.-Iran nuclear talks end after ’significant progress’ (South Africa Philippines Nigeria) China encourages dollar buying to slow yuan ascent By Reuters Economy Published 02/26/2026, 07:45 PM Updated 02/26/2026, 08:54 PM China encourages dollar buying to slow yuan ascent 0 Chinese Yuan US Dollar -0.25% BEIJING, Feb 27 - China’s central bank moved on Friday to slow the pace of rapid yuan appreciation, saying it will scrap the foreign exchange risk reserves for some forward contracts in a move that would encourage dollar buying. The decision came after yuan firmed to a near three-year high against the U.S. dollar on Thursday in onshore trading, extending a rally driven by exporters rushing to sell dollars following last year’s record trade surplus. China’s offshore yuan weakened roughly 0.2% on the news. "It’s quite unexpected to me," said Yuan Tao, an analyst at Orient Futures. "It means the PBOC is intervening as the yuan’s appreciation is too fast." The People’s Bank of China said it would lower the foreign exchange risk reserves for financial institutions when purchasing foreign exchange through currency forwards to zero from 20%, starting March 2. The move reverses the PBOC’s September 2022 decision to raise the risk reserve requirements to stem the yuan’s rapid losses and capital outflows. The central bank said the move was to "support enterprises in managing exchange rate risks," and that the PBOC would continue to maintain the basic stability of the renminbi exchange rate at a "reasonable and balanced level." Liu Yang, general manager of the financial market business department at Zheshang Development Group, said in the near term, the move will release some pent-up demand for buy...
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