China Extends Yuan Forwards Deposit Rule to Foreign Institutions
(Bloomberg) -- China will expand to foreign banks a measure designed to shore up the yuan and make it more costly for traders of forward contracts to bet on swings in the currency.
The People's Bank of China will from Aug. 15 begin imposing a 20 percent reserve requirement on offshore financial institutions trading foreign-exchange forwards for clients, according to a statement on Chinamoney.com.cn, a website of the China Foreign Exchange Trade System. The money will have to deposited when the institutions settle trades in the onshore market, and it will be held at zero interest for one year, according to the statement.
“This kind of tax will not change market expectations, and therefore will have limited impact on containing capital outflows,” Zhou Hao, an economist at Commerzbank AG in Singapore, wrote in a note. “Today's announcement hints that China's central bank sees that it is time to change the trajectory of the yuan's exchange rate.”
The central bank in October implemented a similar rule for domestic traders, a move intended in part to support the yuan. Wednesday's statement comes amid rising pressure on the yuan, with Britain's vote to leave the European Union adding to the stresses of a weakening economy and the risk of capital outflows.
The onshore yuan fell 0.11 percent to 6.6892 per dollar as of 7:18 p.m. in Shanghai, extending its decline over the past five days. The offshore yuan dropped 0.16 percent to 6.6993. A Bloomberg replica of the CFETS RMB Index, a basket of 13 currencies that's monitored by the PBOC, retreated 0.07 percent to 94.42.
To contact Bloomberg News staff for this story: Li Hui in Beijing at hli355@bloomberg.net. To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net, Edwin Chan, Robin Ganguly
With assistance from Li Hui
-
Unhedged Position: Can India See An Indonesia-Style Time Correction?
The Nifty is trading below levels it first clocked in 2024. Is there, then, as I have suggested in the headline, potential that the current time correction drags on painfully for the next three-five, even ten years?
-
Navigating Friction And Energy Realities: An Analysis Of Marco Rubio's October Visit To India
Occurring at a critical juncture marked by stalled trade negotiations and escalating geopolitical pressures over global energy supplies, the visit offers a profound window into modern US-India relations.
-
India Exports Capital. Why Not Export Trusteeship?
The big question, then, is whether India can build an institution that global borrowers, investors, banks, and lawyers can trust, even without an Indian connection.
-
France's Economy & Politics Are In Crisis | The Reason Why
Let's look at how the French economy and politics evolved under Nicolas Sarkozy, Franois Hollande and Emmanuel Macron.
-
You May Inherit The Business. You Must Earn Its Credibility.
Succession tests the founder's ability to share authority as much as it tests the next generation's readiness to assume it.
-
Signing Deals Is One Thing; Making Them Work Is Another | The Week In Whys
Sometimes, things don't turn out as planned. Indian companies have lost some bids to rivals, some projects won't produce until 2030.
-
FOMC Wall, PERM Suspension, Hospital Stocks | Talking Points This Week
A PERM suspension would directly affect green-card sponsorship rather than H-1B visas, so the near-term earnings impact could remain relatively limited. The key question is whether this marks a new phase in US scrutiny of Indian IT.
-
Everything, Everywhere, All At Once: Dalal Street's Week To Forget | Joining The Dots
Visa curbs, a Starlink spat and cancer drug caps: what connects this week's shocks for Indian markets
-
India Is Going Abroad For Critical Minerals. But It May Take Years To Pay Off | The Reason Why
Although India's steps are in the right direction, they remain modest compared with India's growing dependence.
-
When Everyone Has AI, What Gives You An Edge?
India's young workforce is entering an uncertain world of work where powerful AI tools are becoming widely accessible. The advantage will belong to those who combine deep expertise with digital fluency, and the distinctly human capabilities that technology cannot manufacture.
