Offshore Yuan Slides Nearly 0.2% as China Raises Foreign Currency Deposit Reserve Ratio

The offshore yuan fell nearly 0.2% after China raised the reserve ratio on foreign currency deposits, a move that increases the share of dollar-denominated deposits banks must hold as reserves and thereby constrains their capacity to lend in foreign currency. The transmission runs through liquidity and capital flows: higher reserve requirements tighten the supply of offshore dollar funding in the onshore system, which can raise dollar borrowing costs for Chinese banks and corporates while reducing the incentive to hold or convert dollars, pressuring the yuan. Offshore CNH exposure is most sensitive because the move signals Beijing's willingness to lean against depreciation or speculative dollar demand, and foreign investors holding yuan-denominated assets face renewed repricing of currency risk. Traders will watch the People's Bank of China's daily USD/CNY fixing and the next round of foreign exchange reserve and capital flow data for evidence of whether the tightening is stabilizing the currency or prompting further outflows.

The Chinese Yuan (CNY / CNH) is managed by the PBOC with a daily reference fix. PBOC fixes, Chinese trade data, and Politburo statements drive USD/CNH direction. Offshore CNH responds faster than onshore CNY.

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