(MENAFN) On the commencement of the new trading week this Monday, the People's Bank of China, the central bank of the country, infused 244 billion yuan (USD34.21 billion) into the banking system through reverse repo operations. This injection was executed in two tranches, with 184 billion yuan (USD25.94 billion) allocated through 7-day reverse repo operations at an interest rate of 1.8 percent. Additionally, the central bank provided 60 billion yuan through the same mechanism for a 14-day period, carrying an interest rate of 1.95 percent. According to reports from the New China News Agency (Xinhua), the central bank clarified that this proactive measure is aimed at "maintaining acceptable and abundant cash liquidity in the banking system."
Reverse repurchases, commonly known as "reverse repo" operations, involve the central bank purchasing securities from commercial banks through a bidding process, with a commitment to sell them back at a later date. This strategic move is part of the central bank's broader efforts to manage liquidity levels and ensure the stability of the financial system.
In the foreign exchange market, the Chinese yuan exhibited strength against the US dollar during the trading session. The exchange rate for the Chinese currency saw an increase, reaching 7.0933 yuan per dollar. This marked a slight improvement from the previous week's closing rate of 7.0957 yuan per dollar. Consequently, the dollar experienced a decline of 24 Chinese pips per yuan. Notably, Chinese regulations permit the yuan to fluctuate by up to 2 percent above or below the central bank's guidance rate each trading day in the spot foreign exchange market.
It's important to highlight that the indicative price of the yuan against the dollar is determined based on purchase prices provided by major financial institutions before the commencement of daily interbank market transactions. This proactive liquidity injection by the People's Bank of China underscores its commitment to maintaining stability in the banking system amid evolving market conditions.
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