Beijing:The People's Bank of China has raised the reserve requirement ratio for foreign currency deposits from 4% to 6% in an effort to moderate the rapid appreciation of the yuan. This move is intended to slow, but not completely halt, the currency's rise.

According to Anadolu Agency – English, the decision was announced on Tuesday as a measure to manage foreign currency liquidity at financial institutions. The increasing value of the yuan has been putting China, the world's largest exporter, at a disadvantage by making its goods more expensive abroad.

The yuan has seen a significant rise, with the US dollar/Chinese yuan exchange rate falling by approximately 4.5% this year, reaching its highest level against the US dollar since 2022 by the end of October. Sadi Kaymaz, an Asian markets analyst, stated that the new reserve requirement will take effect on November 15, marking the first such increase by the central bank in five years.

The decision serves as a warning signal from Beijing to temper market expectations after four consecutive months of yuan appreciation. Kaymaz noted that despite the strong Chinese exports and the country's significant trade surplus supporting the yuan, corporate selloffs of dollar holdings make it unlikely that a single $24 billion operation will significantly impact the overall trend. He emphasized that while the decision may slow the yuan's appreciation, Beijing's actions might draw scrutiny due to the existing tension created by China's massive trade surplus.