China to open forex market for foreign central banks

“It also shows that the central bank will continue to intervene in the FX market in the coming months as depreciation expectation is still there”, Shen said.

The People’s Bank of China surprised global markets on August 11 by devaluing the yuan by almost 3 percent.

Zhang said that Chinese authorities have forecast that the renminbi will depreciate to the 6.5 yuan (US$1.019) level against the U.S. dollar by the end of this year to narrow the spread between the CNY and the CNH, but the Chinese currency will rise to the 6.4 yuan (US$1.003) mark against the greenback in 2016.

China’s Premier Li Keqiang tried to reassure investors last week while speaking to the World Economic Forum. The former operations serve mainly corporate customers and the latter service individual clients.

The PBOC also said in the same statement that financial institutions in the country sold more foreign exchanges than the central bank in August, which was mainly due to ample foreign-currency liquidity in the nation’s banking system and high demand for foreign currencies from enterprises and individuals.

Growing volatility did not weaken the yuan as a payment tool among Taiwanese firms or individuals.

“Local companies have grown increasingly comfortable with doing business in yuan, especially technology companies with operations in China”, the bank official said.

The deregulation is aimed at boosting yuan deposits and foreign currency-related investments in the local market as Taiwan seeks to catch up with Hong Kong in its bid to become a regional financial hub. Earlier this month, China’s central bank issued new rules requiring banks buying and selling currency forwards denominated in USA dollars for clients to deposit 20% of their sales as reserves.