(Yicai Global) Sept. 26 -- China’s central bank will bring back the risk reserve requirement ratio for forward foreign exchange sales, dubbed China’s Tobin tax, as the Chinese yuan continues to weaken versus the US dollar.

The risk RRR for forward forex sales, which aims to disincentivize short-term currency speculation, will be raised to 20 percent from zero starting on Sept. 28, the People’s Bank of China said today. In other words, if a bank signs a USD10 billion forward forex trading deal, it will need to hand over USD2 billion of reserve funds to the PBOC, which will fully refund the money a year later.

The PBOC set the yuan’s reference rate against the US dollar at 7.0298 today, 378 basis points below the level on Sept. 23 and down 10.3 percent from the beginning of the year. The offshore yuan rebounded to 7.1319 from 7.1601 as of 9.18 a.m. Beijing time, just two minutes after the central bank’s announcement.

Reintroduction of the risk RRR for forward forex sales, which was mothballed in October 2020 when the redback soared, is the second major move by the PBOC to stem the yuan’s deprecation. On Sept. 5, it announced a 2 percentage points cut in the forex reserve requirement ratio to 6 percent from Sept. 15, after the yuan fell past 6.94 to the dollar that day.

Editor: Futura Costaglione