Reserve requirement cut possible, but lending facility option available

The strong yuan, which hit a 16-month high on Thursday, will create more leeway for China to cut its commercial banks' reserve requirement ratio, but since liquidity remains ample, it is more advisable for the central bank to resort to open market operation for capital management, said a former official from the State Administration of Foreign Exchange.

The central parity rate of the yuan, the daily trading reference, was raised to 6.5269 per dollar on Thursday, the ninth consecutive day that it has been lifted. It hit the highest level against the dollar in nearly four months, while both the onshore and offshore spot rates reached a 16-month high.