The People’s Bank of China (PBOC) responded to the increasing demand for the US dollar by adjusting its cross -border macroprudential parameter.
The decision of the Central Bank to increase the parameter from 1.50 to 1.75 enables domestic companies and financial institutions to take out more cross -border loans.
The adjustment then came the balance of the foreign exchange for banks a shortage of $ 10.5 billion, which marked the first negative reading since July 2024. This deficit contrasts with the figures from the previous month. The increase in demand for the US dollar was particularly noticeably in service transactions.
In recent weeks, domestic importers have actively purchased the purchase of US dollars through Foreign Exchange Forwards. This step is a strategy to cover itself against potential risks related to rates, which has contributed to an upward push on forward points.
The policy change of the PBOC on January 13 reflects the efforts to manage market expectations with regard to exchange rates.
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