Photo shows an exterior view of the People's Bank of China in Beijing, capital of China. Photo: Xinhua

China's central bank on Friday said it will cut the foreign exchange reserve requirement ratio for financial institutions by 2 percentage points from September 15.

The reserve requirement ratio will be reduced from its current 6 percent to 4 percent, the People's Bank of China said in a short notice on its website.

The move aims to improve "financial institutions' ability to use foreign exchange capital," said the notice.

The cut will help increase the liquidity of the US dollar in the market and contribute to the stability of the yuan exchange rate.

Experts said the move sends a positive signal to the market, which is conducive to stabilizing yuan exchange rate expectations.

Due to the tightening of monetary policy by the US Federal Reserve, the US dollar index remained strong, which triggered the passive depreciation of the yuan against the greenback.

The central parity rate of the yuan strengthened 23 pips to 7.1788 against the dollar Friday, according to the China Foreign Exchange Trade System.

The central bank cut the forex reserve requirement ratio last time in September 2022, slashing it by 2 percentage points.