A New Perspective On China’s FX RRR Hike 1

How will Evergrande's default affect other markets?

The apparent catalyst for last week’s plunge in the USDCNY rate was the Chinese government’s decision to increase the reserve requirement ratio (RRR) for domestic banks’ foreign exchange (FX) deposits. This effectively reduces the amount of USDs available in the Chinese economy, and was ostensibly done to halt the CNY’s continued strength vs the Dollar. Is this too simplistic?

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