The People's Bank of China (PBoC) cut the repo rate by 10 bps. Economists at Commerzbank analyze Yuan (CNY) outlook after the surprising decision.

Surprise 7-day reverse repo rate cut

In a surprise move yesterday, the PBoC cut the 7-day reverse repo rate to 1.9% from 2%. The rate cut can be seen as the government acknowledging concerns over China’s growth outlook, and that policymakers are finally willing to step up their efforts to shore up growth.

Further monetary policy easing in China will continue to weigh on the Yuan exchange rates.