China’s central bank adds liquidity via reverse repos

Author: xinhua

China’s central bank injected funds into the financial system through open market operations Saturday. The People’s Bank of China said it has conducted 170 billion yuan (about 24.69 billion U.S. dollars) of seven-day reverse repos at an interest rate of 2 percent.

The move aims to keep month-end liquidity in the banking system stable, according to the central bank.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future. The central parity rate of the Chinese currency renminbi, or the yuan, weakened 12 pips to 6.8847 against the U.S. dollar Saturday, according to the China Foreign Exchange Trade System. In China’s spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

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