China will allow more banks to sell currency forwards to their clients to further nurture market demand and the nation's nascent derivatives market, the country's foreign exchange regulator said.
Smaller Chinese banks that were previously disallowed from selling currency forwards can now partner with the bigger, approved counterparts to offer forward contracts to clients, the State Administration of Foreign Exchange said on its website.
To match its growing economic clout, Beijing wants to deepen its financial market by incrementally easing the government's grip over its currency and interest rate formation systems, said The Reuter in a report.
Currently, a Chinese bank must have an annual foreign exchange turnover of at least US$20 billion before it can apply for a license to sell currency forwards. That has shut out many small banks from the forwards market. Only 67 banks held the license in 2009.
Bank of China is the biggest player in the forwards market and sells forwards for a range of currencies including the U.S. dollar, the euro, sterling, the Hong Kong dollar and the yen.
While the yuan is still firmly controlled by the government, the break of its de facto peg to the U.S. dollar in June has made it slightly more volatile.
The yuan has gained about 3.1 percent since its June de-peg, trading at 6.62 yuan to a US dollar.
In the long run, this should feed demand for currency forwards among Chinese importers and exporters, most of whom are not yet used to exchange rate fluctuations and inexperienced in managing currency risks, said an Reuter report.
An expansion of the forwards market is therefore an important step in helping Beijing fulfill its vows to free up the yuan to market forces, the report said.
People's Daily Online
Smaller Chinese banks that were previously disallowed from selling currency forwards can now partner with the bigger, approved counterparts to offer forward contracts to clients, the State Administration of Foreign Exchange said on its website.
To match its growing economic clout, Beijing wants to deepen its financial market by incrementally easing the government's grip over its currency and interest rate formation systems, said The Reuter in a report.
Currently, a Chinese bank must have an annual foreign exchange turnover of at least US$20 billion before it can apply for a license to sell currency forwards. That has shut out many small banks from the forwards market. Only 67 banks held the license in 2009.
Bank of China is the biggest player in the forwards market and sells forwards for a range of currencies including the U.S. dollar, the euro, sterling, the Hong Kong dollar and the yen.
While the yuan is still firmly controlled by the government, the break of its de facto peg to the U.S. dollar in June has made it slightly more volatile.
The yuan has gained about 3.1 percent since its June de-peg, trading at 6.62 yuan to a US dollar.
In the long run, this should feed demand for currency forwards among Chinese importers and exporters, most of whom are not yet used to exchange rate fluctuations and inexperienced in managing currency risks, said an Reuter report.
An expansion of the forwards market is therefore an important step in helping Beijing fulfill its vows to free up the yuan to market forces, the report said.
People's Daily Online
