The People’s Bank of China (PBOC), the central bank, injected 14 billion yuan (about $1 billion) into the banking system on Wednesday through 7-day reverse repurchase operations with an interest rate of 1.8%.
This comes after injecting 137 billion yuan using the same mechanism yesterday.
The central bank stated that this move aims to “maintain reasonable and abundant liquidity in the banking system,” as reported by Xinhua, China’s official news agency.
Reverse repurchase, also known as “reverse repo,” involves the central bank buying securities from commercial banks through competitive bidding with an agreement to sell them back in the future.
In the foreign exchange market, the Chinese yuan weakened against the US dollar by 232 basis points, reaching 7.0027 yuan per dollar in today’s trading.
Chinese regulations allow the yuan to fluctuate by up to 2% from the central bank’s guidance rate on a daily basis in the interbank foreign exchange market.
It’s worth noting that the guidance rate for the yuan against the US dollar is determined based on the buying rates provided by major financial institutions before the start of interbank market trading each day.
