China Digs Deep Into Its Currency Toolkit to Manage Yuan
- Central bank took its first concrete action in months Monday
- Authorities also bump capital-outflow quota by $10 billion
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As China’s central bank pulls back from direct intervention in its currency market, officials are reverting to old tools to manage the yuan.
Authorities on Wednesday said they granted an additional $10 billion for funds to invest in securities overseas, bumping the capital-outflow quota to a record $147 billion. On Monday, the People’s Bank of China said lenders will need to hold more foreign currencies in reserve, a move that will reduce the supply of the dollar onshore. Officials have pulled on multiple levers to influence the yuan since October, when China cut the cost of shorting the currency to zero and removed a key factor used by banks to calculate the daily reference rate.