China Makes a Surprising Decision for the First Time in 2022.. Defending the Yuan By Investing.com

China Makes a Surprising Decision for the First Time in 2022.. Defending the Yuan By Investing.com
China Makes a Surprising Decision for the First Time in 2022.. Defending the Yuan By Investing.com

© Reuters.

Investing.com – For the first time this year as major currencies weakened violently against the People’s Bank of China, the People’s Bank of China made a number of important decisions.

The bank resumed its 14-day reverse repo for the first time since late January, and cut the interest rate on the liquidity instrument by 10 basis points to 2.15%.

China’s central bank lowered the borrowing cost for 14-day reverse repo contracts on Monday and ramped up liquidity injections to counter rising demand at the end of the quarter.

more pumping

The People’s Bank of China (PBOC) injected 2 billion yuan ($286.54 million) through a 7-day reverse repurchase and another 10 billion yuan through the 14-day repayment period, the bank said in a statement.

China’s central bank lowered the borrowing cost for 14-day reverse repo contracts on Monday and ramped up liquidity injections to counter rising demand at the end of the quarter.

The People’s Bank of China (PBOC) injected 2 billion yuan ($286.54 million) through a 7-day reverse repurchase and another 10 billion yuan through the 14-day repayment period, the bank said in a statement.

highest since july

The People’s Bank of China said the higher daily cash injection, compared to daily supply of 2 billion yuan since July, was in order to “maintain a stable liquidity level at the end of the quarter,” according to the statement.

The People’s Bank of China (PBOC) also resumed its 14-day operations for the first time since late January, cutting the interest rate on the liquidity instrument by 10 basis points to 2.15% from 2.25%.

The cut was a move to catch up with the central bank’s decision in August by cutting some key interest rates, including the 7-day reverse repo rate, to revive demand for credit and support the faltering economy.

With reverse repo not due on Monday, the People’s Bank of China injected a net 12 billion yuan through short-term liquidity instruments.

highest ever

Last week, the People’s Bank of China (China’s central bank) decided to raise the reference rate of the yuan, which is the highest ever for the Chinese currency, as China expanded its defense of its currency by setting its reference rate for the yuan with the strongest bias ever.

During Wednesday’s trading, the US currency rose against levels to 6.9644 yuan per dollar, an increase of 0.45%.

Traders have ramped up their 100bp bets, since the US Labor Department early Tuesday released a hotter-than-expected US CPI report that seemed set to bolster an aggressive stance by the Federal Reserve.

The People’s Bank of China set the lift at 6.9116 per dollar, 598 points stronger than the average estimate in a Bloomberg survey of analysts and traders.

The strong lift surpassed the previous record of 454 points seen last Wednesday (September 7) and comes on top of the reduction in foreign exchange reserve requirements for banks, which was also aimed at supporting the currency.

The renewed decline from the central bank comes with the external weakening again towards 7 yuan per dollar, its lowest level since 2020.

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