The central bank has lowered the forward foreign exchange risk reserve requirement ratio to 0, which helps reduce the cost of forward foreign exchange purchases for enterprises.

The central bank announced that the forward foreign exchange sales risk reserve ratio has been reduced from 20% to 0%, which can lower the cost of forward foreign exchange purchases for enterprises, encourage companies to actively hedge their foreign exchange risks through derivatives, and support them in managing exchange rate risks more effectively. When the reserve ratio was 20%, banks needed to freeze $20 of non-interest-bearing funds for every $100 of forward foreign exchange sales, increasing the cost of forward purchases. Now that the reserve ratio has been lowered from 20% to 0%, banks no longer need to freeze funds, and the cost of forward foreign exchange purchases will decrease accordingly. This is the first time in nearly three and a half years that the central bank has used this tool again. The reduction in the forward foreign exchange sales risk reserve ratio essentially signifies a reasonable exit from previous measures and a return to a neutral foreign exchange policy. This adjustment will help financial institutions offer cost-effective foreign exchange risk management products to enterprises. Experts say that given the complex and changing external environment, the RMB exchange rate remains highly uncertain, and foreign trade companies should prepare to hedge their exchange rate risks. (CCTV News)