“The People's Bank of China's (PBOC) cut to the foreign exchange reserve requirement ratio on Monday is an early move to curb expectations of a rapid decline of yuan against the US dollar,” the 21st Century Business Herald reported on Tuesday, citing analysts.

Additional takeaways

“Some foreign investors have expected continued yuan depreciation as the US Dollar Index marches towards 110, and as the euro and yen hit their lowest levels in 20 years.”

“Speculators have also increased bets on a declining yuan, adding to bearish sentiment.”

“The onshore and offshore yuan quickly rebounded by about 200 basis points following the PBOC's move, as some overseas investors reduced indiscriminate short selling.”

Related reads

• USD/CNY: Forex RRR cut unlikely to stem the yuan's weakening trend – ING
• PBOC: Will cut FX reserve requirement ratio to help limit yuan weakness