MUFG notes that the People's Bank of China (PBoC) raised the FX reserve requirement ratio to 6% from 4% after USD/CNY moved toward 6.65, effective 15 November. The measure is seen as locking up about USD24 billion in FX liquidity and aiming to slow CNY appreciation rather than reverse it. MUFG keeps its USD/CNY forecasts at 6.65 by end-2026 and 6.50 by Q3 2027.

Policy tweak to temper CNY strength

"In China, PBOC raised the FX reserve requirement ratio to 6% from 4% after USD/CNY fell towards 6.65, effective 15 November."

"The measure is expected to lock up approximately USD24 billion in foreign exchange liquidity."

"This policy, in our view, is to reduce the pace of CNY’s appreciation against the Dollar, rather than an effort to reverse CNY appreciation trend."

"CNY’s strengthening this year has been supported by China’s large trade surplus and rising corporate FX conversion of proceeds from trade surplus to Reminbi."

"We maintain our USD/CNY forecasts at 6.65 by end-2026 and 6.50 by Q3 2027."

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