FXStreet reports that in the view of economists at HSBC, the People’s Bank of China (PBoC) policy change is unlikely to reverse the downward trend in USD/CNY.

“On 10 October, the PBoC announced that the foreign exchange (forex) risk reserve ratio for forward forex trading will be reduced from 20% to zero, effective 12 October. The central bank said on the same day that it will continue to maintain flexibility in the CNY exchange rate and stabilise market expectations.”

“We expect that a removal of the policy tool should not reverse the downtrend by USD/CNY.”

“With the Fed expected to keep short-end US rates near zero for the next couple of years, the yield advantage of the CNY will likely remain. We also think China will continue to have a positive basic balance, given the larger current account surplus and foreign bond inflows. All in all, we expect the CNY to remain resilient over the medium-term.”