BEIJING—China is reversing a range of measures it had put in place to support its currency, a response to a recent surge in the value of the yuan that has hurt Chinese exporters and added to the country’s economic headwinds.
Starting Monday, the People’s Bank of China will scrap a two-year-old rule that made it more expensive for traders to bet the yuan will fall in value, according to a central bank notice sent to commercial banks late Friday.
The move, which ends a deposit requirement on trades called currency forwards, will make it less expensive for companies and investors to buy dollars while selling the yuan. That would put some pressure on the currency to decline, traders and analysts said. The step will “fend off macro-financial risks,” said the central bank notice, which was reviewed by The Wall Street Journal.
According to a separate notice by the PBOC, the monetary authority late Friday also removed the reserve requirement on foreign banks’ yuan deposits, which will release more yuan funds into what is known as the offshore yuan market in Hong Kong, potentially making it easier for foreign investors to bet against the yuan. That requirement was enacted in January 2016.
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Source: New feed 2