The Chinese central bank injects two billion yuan into the banking system

The People’s Bank of China (the central bank) on Tuesday injected two billion yuan ($281.5 million) through the 7-day reverse repurchase mechanism at an interest rate of 1.8%.

The central bank says that this step aims to maintain acceptable and abundant cash liquidity in the banking system, according to the New China News Agency (Xinhua).

Reverse repurchases, known as “reverse repo,” are operations in which the central bank buys securities from commercial banks through bidding, with the agreement to sell them again in the future.

In the exchange market, the Chinese yuan fell again against the dollar in today’s trading. The People’s Bank of China’s indicative rate was 7.1028 yuan per dollar, a decline of 49 Chinese pips from its level yesterday, which was 7.0979 yuan.

Chinese rules allow the yuan to rise or fall by 2% above the central bank’s guide rate each trading day in the spot foreign exchange market.

It is noteworthy that the indicative price of the yuan against the dollar is determined on the basis of the purchase prices provided by major financial institutions before the start of daily interbank market transactions.