Pay Attention To The Central Bank'S Reduction Of Foreign Exchange Reserve Ratio

On April 25, the people's Bank of China announced that, in order to improve the ability of financial institutions to use foreign exchange funds, the people's Bank of China decided to reduce the foreign exchange deposit reserve ratio of financial institutions by 1 percentage point from May 15, 2022, that is, the foreign exchange deposit reserve ratio will be reduced from the current 9% to 8%.

The chief economist of CITIC Securities clearly said that the US dollar index and the interest rate of US Treasury bonds rose significantly due to the impact of the US Federal Reserve's expectation of further interest rate hikes. Reducing the foreign exchange reserve ratio will help to increase the supply of foreign exchange in the market, stabilize the market fluctuation, and play a role in stabilizing market expectations and RMB exchange rate.

Wu chaoming, vice president of the finance and Credit Research Institute, said that the reduction of the foreign exchange deposit reserve ratio can increase the foreign exchange loan funds of domestic financial institutions, help to stabilize the foreign exchange market expectations, and promote the basic stability of the RMB exchange rate at a reasonable level, which is also an important signal of the central bank's release to the market. Moreover, it is conducive to the stability of the RMB exchange rate and the stability of the domestic monetary policy.

(source: China Cotton Association)