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Today, People's bank of China (PBoC) announced that it will be conducting its open market operations (OMO) on a daily basis, instead of previous system of conducting on Thursday and Friday. These OMOs are vital source of liquidity in the market so the announcement is quite significant. With everyday actions, PBoC would have better grip over liquidity as well as interest rates.
Through this OMOs PBoC injects cash into the banking system via auctions, where it gobble up bonds and release liquidity, a miniature form of quantitative easing.
Since in January, movement in Yuan spooked financial markets across Globe, PBoC has been increasing its grip over the exchange rate and interest rate.
Some analysts are however considering today's step as defensive as it means PBoC taking up a much safer route for liquidity easing than to ease rates which could have sparked some capital outflow, in search of better rates.
In such a scenario, further easing may remain farfetched. Yuan is up for the day, trading at 6.519 per Dollar in offshore market.
