Yuan set for biggest daily drop in 6 months after PBOC raises FX RRR

China’s onshore yuan weakened on Tuesday after the People’s Bank of China announced a higher foreign-exchange reserve requirement for financial institutions. Business Recorder, citing Reuters, reported that the ratio will rise by 2 percentage points, from 4% to 6%, starting November 15, a step intended to curb dollar liquidity and moderate the currency’s appreciation.

The yuan touched 6.6728 per dollar, its weakest level since October 23, and was trading at 6.6702. If the decline held through the close, its 0.33% daily fall would be the steepest since May 15; the offshore yuan was down about 0.29% in Asian trading. The policy shift follows a 0.74% yuan gain in October, while traders expect year-end exporter conversions to provide seasonal support in December and January. The PBOC also set its midpoint at 6.7150 per dollar, weaker than the Reuters estimate by 661 pips.