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The reduction in reserve

The reduction in reserve | 06 September 2022

06 September 2022, USD/JPY

The reduction in reserve

USDJPY trading plan:

China's central bank said it will cut the amount of foreign exchange reserves that financial institutions must hold, a move seen as aimed at slowing the yuan's recent depreciation. The PBOC said the reduction aimed to improve "financial institutions' ability to use foreign exchange capital," the statement added. The move came after the Chinese yuan's recent slide to two-year lows. The yuan has depreciated by 8% against the dollar in the year to date, as a result of broad dollar strength in global markets and China's worsening economic slowdown. The reduction in reserve requirements would boost dollar liquidity. Based on end July data, when foreign exchange reserves stood at $953.7 billion, the lower requirements would free up around $19 billion. This is a good signal for the stock market and USDJPY, which has a correlation with the shares.

Investment idea: buy 140.50 and take profit 141.77.

David Johnson
Analyst of «FreshForex» company
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