Chinese Yuan Gains on FX Reserve Ratio Cut

The offshore yuan appreciated past 7.27 per dollar, hitting its strongest levels in three weeks after China’s central bank said it will cut the amount of foreign exchange that banks must hold as reserves to support its currency.

The People’s Bank of China lowered the foreign exchange reserve requirement ratio by 200 basis points to 4% beginning September 15, the first such reduction this year as it aims to stem further yuan weakness and help a faltering economic recovery.

A private survey which showed that Chinese manufacturing activity unexpectedly expanded in August also provided a boost to the yuan.

Still, the currency remains close to multi-month lows amid economic uncertainties in China and a series of interest rate cuts from the country’s central bank.