(Yicai Global) Oct. 12 -- China’s yuan fell against the US dollar after the People’s Bank of China moved to slow the currency’s appreciation by waiving a reserve requirement ratio for financial institutions selling some foreign exchange forward contracts.

The PBOC lifted the reserve ratio for some forward forex trading to zero from today, it said on Oct. 10. Previously, financial institutions had to deposit 20 percent of such sales with the central bank to mitigate risk.

On international markets, the yuan opened at 6.7093 to the dollar today, 493 basis points lower than its closing price on the last trading day, and sank to as low as 6.74 before recovering to 6.7084 at 2 p.m. China time. The onshore yuan fell 332 bips from Oct. 9 to open at 6.6930. It weakened to 6.7264 and was trading at 6.7149 as of 2 p.m.

The PBOC strengthened the redback by 670 bips this morning, fixing the central parity rate at 6.7126.

The yuan has been on a winning streak, hitting a 17-month high of 6.7075 offshore on Oct. 9. In the last quarter the currency gained 4.5 percent against the greenback, its best performance in 12 years. The central parity rate has strengthened by 2.82 percent since the start of the year, the spot rate by 3.92 percent and the offshore yuan by 3.89 percent.

The forex market has stayed stable amid balanced market supply and demand since the beginning of this year, the PBOC said. The exchange rate has fluctuated in both directions on the basis of supply and demand, yuan flexibility has been enhanced, market expectations have been stable and cross-border capital flows have been orderly, it added.

The 20 percent reserve ratio was introduced in October 2015 after the yuan started a significant slide. Under the policy, deposits were refundable after one year.

The PBOC also waived the requirement in September 2017 when the yuan stabilized, but after depreciating against the dollar for nearly three consecutive months the following year, the rule was reintroduced.

Editor: Kim Taylor