0022 GMT [Dow Jones] The widening of the yuan trading band is a less risky option to deter hot money inflows, but China's central bank may need to cut the reserve requirement ratio to offset the outflows, says Citi.
It says net capital outflows are likely in the near term as speculators unwind their carry trades, further tightening liquidity.
The People's Bank of China cut the
RRR one month after the daily band was widened in 2012. Citi also sees a
weaker yuan in the near term by the outbound capital flows. The two-way
volatility will also deter speculation and is thus negative to those commodities, e.g. copper and minerals, used as means of carry trade.
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