China Comes to Yuan's Rescue

China tries to salvage the yuan, by making it costlier to short the currency.

The People’s Bank of China (PBOC) announced on Friday that it will impose reserve requirements of 20% on some foreign-exchange forward contracts’ trading  - a tactic expected to arrest yuan shorting tendencies among traders and therefore stabilize the currency.

Although a nation’s weak currency is a potential tailwind to its exports, too much depreciation in the currency might cause capital outflows. PBOC steps in after yuan’s continued losses led to its nearing the 7 per dollar mark. The central bank, however, has indicated that the strategy is for limiting currency volatility amid trade tensions - versus creating capital controls.

Earlier, China had introduced a similar tactic after the 2015 devaluation of the yuan, and had removed it in September 2017.

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Sergey Savastiouk|Expert

Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.