China Blinks: Why Beijing's Currency Intervention Is Doomed To Failure

[To-Whose-Benefit?]

zerohedge
 Tyler Durden
Fri, 08/03/2018 - 15:56

[excerpt]

https://www.zerohedge.com/news/2018-08-03/china-blinks-why-beijings-currency-intervention-doomed-failure-0

The People’s Bank of China today announced a re-introduction of reserve requirements on FX forwards trading which it had eliminated last September just after the Yuan soared against the dollar – a move aimed at taking pressure off the renminbi as the USDCNY rapidly closed in on 7.00. However, as ING's Chris Turner writes, this looks only a temporary reprieve for the renminbi as all prior PBoC attempts to stem CNY weakness haven't been all that successful in reversing a trend.

Reserve requirements back in play

Since 2015 the PBOC has used reserve requirements on FX forward transactions as a tool to control ‘macro-financial risks’. The measure puts a 20% required reserve ratio for financial institutions when conducting onshore CNY forwards business on behalf of customers. The move makes it effectively costlier for the market to fund short CNY positions through the forwards market.

This measure was first used for domestic financial institutions in October 2015 and then broadened to include foreign institutions in July 2016 when USD/CNY was pushing above 6.70. These reserve requirements were scrapped when USD/CNY was dipping below 6.50 in September 2017 amidst broad dollar weakness.

[Absalom]

Anyone familiar w/the history of Asia understands that its most powerful nation has
been and remains Japan, whether the measurement used be economics or politics.
France, Austria and Russia had superior land mass to Britain from the High Middle
Ages till the end of the 19th century and so what???
Similarly, China is the largest Asian nation/state and again, so what???
Many need to turn off the tee-vee and get real!