For example, some monetary policy instruments are mainly targeted for the short-term money market. Since last year, the main purpose of the central bank’s operation in the short-term money market to absorb liquidity with some monetary policy instruments is to sterilize the increase in money supply from foreign exchange purchases.
However, some market participants have not clearly identified the relationship between the RMB position resulted from foreign exchange purchases and the central bank’s open market operations. Of course, this is partly due to the insufficient transparency of information, since only monthly data on changes in foreign exchange are available in the market.