(Yicai) Sept. 1 -- The Chinese yuan strengthened past 7.24 to the US dollar at one point today after China’s central bank said it will lower the amount of foreign currency that commercial banks need to hold as reserves for the first time this year.

The offshore yuan was trading at CNY7.268 against the greenback as of 11.30 a.m. Beijing time today, a jump of 100 basis points from yesterday’s closing price, while the onshore yuan was boosted 51 bps to CNY7.264.

The foreign exchange reserve requirement ratio will fall to 4 percent from 6 percent on Sept. 15 to enhance financial institutions’ use of foreign exchange funds, the People’s Bank of China announced today.

It will be the first cut this year and only the third ever. The previous two were in May and September last year, when the yuan was also under pressure.

The lower ratio will help boost forex liquidity in the banking system, increase the supply of forex in the market, and promote market equilibrium, China Securities News reported today, citing China Everbright Bank analyst Zhou Maohua.

The move gives a clear signal that will allay fears of the yuan continuing to slide, said Bruce Pang, chief economist and head of research at Jones Lang LaSalle Greater China. It helps to stabilize market expectations and keeps the yuan’s exchange rate at an appropriate and balanced level, he added.

The redback has depreciated around 5.6 percent against the dollar since April due to China's slower-than-expected economic recovery and US interest rate hikes.

Editor: Kim Taylor