U.S. producer prices were also lower last month due to weak energy costs, while the country's industrial output declined for a third straight month. Following the poor U.S. economic data, the interest rate futures market has now priced in just one additional rate move by the Federal Reserve this year, compared with previous expectations of three hikes.
It appears that the Chinese authorities want to dampen the speculative flows that bet on a fast depreciation of its currency. Setting an RRR - requiring banks to hold a certain level of currency in reserves - could tighten liquidity leaving less yuan for banks to lend and so making it more expensive for speculators to bet against it.
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