The PBoC giveth the PBoC taketh

The PBoC giveth the Pboc taketh

The  PBoC adjusts the Reserve Requirement( RR)  on FX Forwards trading from 0% (nil) to 20%  but recall in Sept 2017 the RR was pulled when the Yuan was too strong this time around the rule is back in place in a move seen as effort to restrict dollar purchases when the yuan was weakening. Universally traders would wholeheartedly agree this is a more favourable approach than overt intervention. Besides, this does suggest that the PBoC will refrain from using the currency as a ploy in trade war negotiations.

This move will shake out some weaker longs as the market may view the PboC line in the sand is around 6.90’s USDCNH, but it also has far-reaching consequences for long dollar positions across both G-10 and EM currencies which are cratering ahead of today NFP.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes