Beijing (dpa)
On Tuesday, the People’s Bank of China (the central bank) pumped 41.7 billion yuan ($5.9 billion) through a 7-day reverse repurchase mechanism at an interest rate of 1.5%.
The central bank says that these steps aim to maintain acceptable and abundant cash liquidity in the banking system, according to the New China News Agency (Xinhua). Reverse repurchases, known as “reverse repo,” are operations in which the central bank buys securities from commercial banks through bidding, with the agreement to sell them again in the future.
In the exchange market, the Chinese yuan declined against the dollar.
The People’s Bank of China’s indicative rate was 7.0709 yuan per dollar, an increase of 79 Chinese pips from yesterday’s level of 7.0074 yuan. Chinese rules allow the yuan to rise or fall by 2% above the central bank’s guide rate each trading day in the spot foreign exchange market. It is noteworthy that the indicative price of the yuan against the dollar is determined on the basis of the purchasing prices provided by major financial institutions before the start of daily interbank market transactions.
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