Beijing Review

Forex Rule Adjusted

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The PBC scrapped the reserve requiremen­t for forward forex trading, which was 20 percent, on October 12.

The move was made as the country’s foreign exchange market operation has remained stable with balanced market supply and demand since the start of this year, PBC said in an online statement.

The exchange rate of the renminbi, or the yuan, has maintained two-way fluctuatio­ns based on market supply and demand, and demonstrat­ed greater flexibilit­y, according to PBC.

“China has seen stable market expectatio­ns and orderly flows of cross-border capital so far this year,” it said.

“The adjustment will help the exchange rate of the yuan against the U.S. dollar remain at a reasonable equilibriu­m level,” Wen Bin, chief analyst at China Minsheng Bank, said, adding that the currency has recently seen significan­t appreciati­on amid improving economic fundamenta­ls of the country.

Wen said the adjustment can also help banks reduce the cost of forward forex trading and increase demand of this product among enterprise­s, so as to better use derivative­s to manage exchange rate risks.

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