HONG KONG: China’s yuan slipped against the US dollar on Wednesday after the central bank flagged interest rate cuts and a liquidity injection into the banking system, slowing the currency’s recent sharp appreciation.
The People’s Bank of China (PBOC) will cut the borrowing cost of its seven-day reverse repurchase agreements, its benchmark interest rate, by 10 basis points (bps) to 1.40%, effective Thursday, as Beijing seeks to boost demand amid an intensifying US trade war.
The amount of cash that banks must hold as reserves, known as the reserve requirement ratio (RRR), will also be cut by 50 bps.
By 0219 GMT, the yuan was 0.09% lower at 7.2263 to the dollar after trading in a range of 7.2166 to 7.2273.
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Its offshore counterpart traded at 7.2214 yuan per dollar , down about 0.14% in Asian trade. This is China’s first key policy rate cut since September 2024.
“Perhaps the worst of the depreciation pressure on the yuan has faded, and recent strength provided a good window for the PBOC to ease while still being able to maintain its currency stability objective,” said Lynn Song, chief economist for Greater China at ING.
Prior to the market opening, the PBOC set the midpoint rate , around which the yuan is allowed to trade in a 2% band, at 7.2005 per dollar, its strongest since April 7 and 119 pips firmer than a Reuters’ estimate.
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