China's foreign exchange regulator asks banks to limit Yuan outflows

Asks to limit outflows and reduce offshore yuan positions and liquidity

China's SAFE (State administration of foreign exchange) has asked banks to limit yuan outflows.

• Asked to better manage net yuan outflows in their capital accounts in the near term.
• Banks also requested to properly manage cross-border into bank yuan borrowing and corporate offshore yuan lending.

The USDCNF (offshore yuan) rallied last week, but fell sharply in trading yesterday. The pairs spread to the fixed onshore currency (USDCNY) widened on expectations of further easing of the yuan by the PBOC. However, the pair tumbled in trading yesterday (intervention). Verbal intervention seems to the be the next shot across the bow to help stem increased speculation and capital flows.