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Banks to find forex trading easier
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CHINA will relax foreign exchange trading restrictions for banks to foster a more transparent market, the foreign exchange watchdog said yesterday.
The new rules, effective from tomorrow, will replace daily inspection of banks’ foreign exchange positions with weekly reports, according to the State Administration of Foreign Exchange. The rules will also waive an obligation for banks to hold foreign exchange positions according to their deposit-to-loan ratio.
The move aims to facilitate foreign exchange trading for banks and thus help instill transparency into the market, SAFE said in a statement.
Analysts said the move will allow banks more freedom to run their foreign exchange at a time when the US dollar strengthens and emerging-market currencies suffer.
“Given the changing market conditions, the new rules show that capital inflow is no longer the concern for the regulator,” said Tommy Xie, an OCBC Bank economist. “The easing regulatory administrative measures will give banks a freer hand to develop the yuan market.”
He said the direct impact of the new rules on US dollar-yuan exchange rate will be limited but it could dampen the Chinese currency’s depreciation pressure as banks will not be obliged to keep minimum long dollar positions.
The yuan yesterday closed at 6.2026 to the US dollar on the spot market in Shanghai, 0.32 percent firmer from the previous day, the largest daily gain since early May.
Traders said market players are likely to sell the US dollar over the next few trading days.
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