Financial institutions no longer need to set aside cash when buying foreign exchange for clients through currency forwards, Chinese state-owned Financial News reported on Monday, citing a notice from the People’s Bank of China.
The requirement, introduced in August 2015 amid wave of capital outflows, forced banks to hold 20% of sales at zero interest for a year.
Additionally, the PBoC has also removed a reserve requirement for yuan deposited onshore by overseas financial institutions.
The sudden shift is a clear sign that the yuan’s continued strength has become a concern for authorities wary of any impact a prolonged rally might have on exports.
The currency was down as much as 0.78% Monday morning after the new policy was announced.