China Raises FX Reserve Rule to 6 Percent to Slow Yuan Rally

China's central bank moved on Tuesday, November 3, 2026, to slow a long rally in the yuan. The People's Bank of China said it will raise the foreign exchange reserve requirement ratio for financial institutions by 2 percentage points, to 6 percent from 4 percent, effective November 15. Reuters called it one of the strongest moves yet to cool the currency's pace.

The reaction was fast. The onshore yuan weakened as much as 0.37 percent against the dollar to 6.6728, its weakest level since October 23, and Reuters reported the currency was set for its sharpest one day drop in six months. A Reuters calculation based on official foreign exchange deposit data put the extra amount banks must set aside at about 24 billion dollars withdrawn from the financial system.

Why the bank acted

The yuan has gained more than 5 percent against the dollar this year. It has reached its strongest level since 2022 and ranks among Asia's best performing currencies in 2026. A currency that rises that fast squeezes exporters, who earn in dollars and pay costs at home, and it can pull in speculative money betting on more gains.

The central bank gave a short reason. The decision is "aimed at strengthening the management of foreign exchange liquidity in financial institutions," the PBOC said in its statement, as reported by Reuters.

The reserve rule was not the only signal on Tuesday. The PBOC also set its daily midpoint rate weaker for a second day in a row, at 6.7150 per dollar. Reuters said that fixing sat 661 pips weaker than its own estimate, the largest weak side deviation since September 10.

A policy reversal

Tuesday's hike reverses the direction the bank took in September 2023, when it cut the same ratio to stem rapid yuan losses and capital outflows. Then, the problem was a falling currency. Now, the problem is a rising one, and the same tool is being run in the opposite direction.

TradingView's Asia wrap carried the same announcement on Tuesday morning and noted the move lands while Asian chip stocks slide and investors wait for the United States midterm elections. The dollar index edged up 0.1 percent to 101.81 in early trade, Reuters reported, after slipping 0.2 percent on Monday.

What happens next

The new ratio takes effect on November 15, which gives banks a set date to fund the extra reserves. Traders will watch the daily midpoint fixings between now and then for signs of how hard the bank wants to lean against the rally. A string of weaker fixings would confirm Tuesday was the start of a pushback, not a one day warning.

For the rest of Asia, the yuan's path matters beyond China. The currency anchors trade pricing across the region, and a managed slowdown in its rise would take pressure off rival exporters whose goods compete with Chinese products in the same markets.