USD/CNY Jumps as PBoC Cuts FX Risk Reserve to 0% to Cool Yuan Rally

USD/CNY and USD/CNH surged sharply during the Asia-Pacific session after the People's Bank of China cut the foreign exchange risk reserve ratio to 0%, a decisive move aimed at slowing the rapid appreciation of the yuan. The PBoC set the USD/CNY reference rate at 6.9228, signaling its intent to manage the pace of yuan gains. The policy adjustment removes the reserve requirement on FX forward sales, effectively making it cheaper for banks to sell dollars and buy yuan forwards, thereby reducing speculative pressure on the currency. Meanwhile, the Japanese yen remained under pressure as Japan's Katayama flagged FX "urgency" amid continued fiscal expansion under Takaichi's government. Tokyo core CPI slipped below the Bank of Japan's target, complicating the case for further policy tightening. In the UK, consumer confidence fell to a three-month low alongside an 8% drop in car production, weighing on GBP sentiment. Traders should monitor PBoC guidance closely, as further intervention signals could cap yuan strength and drive USD/CNY toward near-term resistance levels.