FXStreet (Córdoba) - Analysts from Danske Bank, analyzed the announcements from the People’s Bank of China regarding its efforts to stop the depreciation of the renminbi (CNY and CNH). Key Quotes: “The biggest change is that the People’s Bank of China (PBoC) announced it will impose reserve requirement ratios on deposits offshore from 25 January 2016. The official reason is that it was decided in December 2014 but that the ratio was set at zero temporarily to allow for preparation.” “This is another tool to manage liquidity in the offshore market and aims at draining liquidity currently to increase the cost of selling the CNH forward. In response, the 12-month CNH HIBOR rate has reached a new high at 6.897% (3.5% in November).” “In addition, the PBoC lowered the daily fixing for USD/CNY to 6.5590 from 6.5637, the lowest fixing in around two weeks.” “China’s is now using three weapons to halt the CNY depreciation: (a ) intervention in the CNH offshore market, (b) pushing up CNH money market rates by not adding back liquidity and imposing a reserve requirement (it makes it expensive to bet against the CNH) and (c) intervention in the onshore market (CNY).” “While China aims for a stable exchange rate, we continue to believe that market forces will work in favour of a further gradual weakening of the CNY and look for USD/CNY to hit 7.00 in 12M. However, China wants to signal very clearly that it is not aiming for a devaluation of its currency. We thus expect that the PBoC will try to keep the CNY stable in the short term using the above-mentioned weapons.” For more information, read our latest forex news.