email rounding up the latestChinese authorities stepped up measures to support the renminbi and boost the country’s housing market in an effort to restore confidence in the world’s second-largest economy.said on Friday it would cut the amount of foreign currency that financial institutions are required to hold in reserve, signalling its resolve to support the renminbi, which has dropped more than 5 per cent against the dollar this year.
But questions over the outlook of cash-strapped developers have subdued demand for Chinese securities and prompted investment banks to downgrade their forecasts for the renminbi’s dollar exchange rate. The reserve requirement cut boosts the amount of dollars available in the local market and means commercial banks can afford to cut the interest rates they offer on dollar deposits. That is intended to make it less attractive to convert renminbi into dollars, which has been contributing to pressure on the Chinese currency.
Sean Callow, senior currency strategist at Westpac, said: “It’s a very difficult battle for Chinese authorities to restore confidence in the currency given the combination of a resilient dollar and weak domestic data from the property sector.”