China’s central bank to cut FX reserve ratio

China’s central bank said Friday that it would lower the amount of foreign-exchange deposits banks will have to hold, a move seen as a bid to shore up the yuan.

The People’s Bank of China said it would cut the foreign-exchange reserve ratio to 4% from 6%, in order to improve financial institutions’ capability to utilize foreign-exchange funds. The central bank said the cut will take effect on Sept. 15.

The reserve ratio cut would boost foreign-exchange liquidity in the market and thereby bolster the yuan, which has been under downward pressure as the Chinese economy slows.

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