BBG headline
The state-owned China Securities Journal says the People's Bank of China may cut the required reserve ratio amid tightening liquidity.
Traditionally this is good news for commodities and commodity FX but it might be interpreted as a sign of panic because of a failing Chinese economy. That's how the devaluation was seen and this could add to the worries.
The PBOC message (which is most-likely a leak) is that it's due to tightening liquidity and that's designed to take the focus off the economy.
So far there has been no reaction in FX. The more-straightforward trade might be Treasury or gold gains.
China last cut the RRR by 50 bps on June 28 when it also cut interest rates (the RRR is seen as the more-powerful tool). On April 19 the PBOC also cut the RRR by 100 basis points. After a brief, opening climb, the Australian dollar fell 60 pips but then went on to gain a quarter-cent over the next week or so.
Recent rate moves have all taken place on the weekend so if there isn't any action before then, look for speculation ahead of the weekend.
