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Chinese banks warn of currency market risks ahead of Britain referendum
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Chinese banks warned clients against taking large positions in the currency market, and plans to take temporary measures to tighten up foreign exchange trades today when the market may experience huge volatility during the referendum on whether the UK should remain in the European Union or leave.
Lenders including Bank of China, Agriculture Bank of China, China Citic Bank and China Merchants Bank said they plan to control the price difference of currency quotations, and even cap the maximum amount of transactions on currencies that could gyrate and liquidity dries up.
Those measures will be activated during the period from June 22 to June 25, and be halted after the market calm down next week, according to notice issued separately notice on lenders' official websites today.
In recent weeks, worries that a British exit from the EU will stoke global economic uncertainty has roiled financial markets, spurring wild swings in the pound, euro, yen and other currencies and pushing banks to warn of more volatility to come.
"If the UK votes to leave the EU, the pound and euro could slump while funds will flow to buy yen and bullion to hedge," a forex trader at Bank of Shanghai told Shanghai Daily.
The vote on "Brexit" could cause sterling to fall by as much as 20 percent, according to HSBC, and may rise as much as 4 percent if Britain decides to stay, ING estimates.
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