The offshore yuan headed for its first decline in almost three weeks after the People's Bank of China said it will raise the foreign-exchange reserve requirement ratio from Nov. 15.
The Chinese currency weakened as much as 0.3% to 6.6664 per dollar in offshore trading. The central bank will increase the ratio by 2 percentage points from the current 4% to 6%, according to a statement.
The move is designed to drain foreign-currency liquidity from the onshore interbank system, effectively disincentivizing commercial lenders from offloading dollars and accelerating the yuan's recent climb. The onshore yuan had strengthened against the dollar for 13 consecutive sessions as of Monday, marking its longest winning streak on record.
Hao Zhou, chief economist at Guotai Junan Hong Kong Ltd., said the move "is likely to be interpreted as a targeted measure to lean against rapid yuan appreciation."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing