China says it will expand scope of banks' forex derivatives business
BEIJING :China's foreign exchange regulator said on Friday
it would expand the scope of banks' foreign exchange derivatives business.
Qualified banks could provide derivatives services between
yuan and foreign currencies to cooperative banks, including forward settlements
and currency swaps, the State Administration for Foreign Exchange (SAFE) said
in a notice on its website.
The regulator added that banks should guide their customers
to establish a risk-neutral mentality by focusing more on the core business and
hedging foreign exchange risks instead of betting on currency for more profit,
according to the notice.
It added that banks should provide customers with exchange
rate and risk management services based on the principles of real demand and
the principle of risk neutrality, according to the notice.
Currency traders said the latest move was unlikely to bring
volatility to the yuan in the short term.
China's financial regulators have urged companies to protect
themselves against currency risks this year as the central bank gradually
loosens its control of the yuan, but are struggling to convince local
businesses to hedge.
Sources told Reuters last week that a central bank-led
self-regulatory group that helps to oversee China's foreign exchange industry
had asked commercial banks to cap the size of their proprietary trading
accounts, which many market participants interpreted as a move to limit financial
institutions' speculation on the yuan.
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