Central Bank of China looks to keep yuan stable, reasonable credit growth

Among the suspended services was the liquidation of spot positions for clients and some other benefits related to cross-border, onshore and offshore businesses.

China has taken a slew of steps to keep the yuan stable since it devalued the currency in August.

The People’s Bank of China (PBOC) sent a notice to the impacted foreign banks on Monday, the sources said. It is believed that the foreign banks are targeted due to their huge cross border foreign transactions.

According to him, “They hope to ease foreign exchange buying pressure and ease depreciation pressure on the yuan”.

Demand for dollars in the Chinese foreign exchange market typically rises at the end of the year, increasing market volatility and sometimes pushing the yuan sharply lower. Traders have said they expect intervention from the central bank if the spread between the two markets widens to 1,000 pips.

After the changes, China’s forex market is set to grow, especially in terms of trading volume, which represents a major opportunity for financial institutions with forex expertise and cross-border capacity, the CICC predicted.

Standard Chartered and DBS, which also conduct trading in foreign exchange in China, did not respond to requests for comment. China has scaled back efforts to prop up the yuan after the International Monetary Fund included the currency in its Special Drawing Rights on November 30. The measures are aimed at making it harder for speculators to short the yuan in the offshore market, according to National Australia Bank. The Hong Kong-traded offshore yuan hit an intraday low of 6.5965 on Wednesday morning, its weakest since late September 2011.

Also, yesterday, a fall of US$150.3 billion (HK$1.17 trillion) in China’s foreign debt in the third quarter showed that some firms had moved to repay some of their liabilities to hedge against currency risks, the State Administration of Foreign Exchange said.