China mulls extending currency trading hours

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China mulls extending currency trading hours

Four sources familiar with the matter said that China is considering extending its onshore currency trading hours, a move that could spur demand for the yuan from global investors.

The central bank has been surveyed by some major market players and asked for feedback on the extension of the daily session until 3 am Beijing time.

One of the sources who refused to be named said covering international trading hours is part of the International Monetary Fund's requirements for Special Drawing Rights SDR basket currencies.

Extending trade until the small hours, if it happened, would cover much of the European and US trading day. It could allow overseas investors to hedge their currency risk more closely and expand the global utility of the yuan.

The weighting of the Chinese yuan in its SDR basket was increased last month by the IMF, the first review since the yuan joined the basket of currencies in 2016 in a move that was a milestone in Beijing's efforts to internationalise its currency.

The State Administration of Foreign Exchange SAFE will continue to push forward with various market infrastructures, including extending trading hours, based on market demand, according to a statement to the FX regulator.

An official from the central bank had stated earlier in the month that there were plans to extend interbank trading hours, but they didn't elaborate. Details of the proposal were first reported by Bloomberg.

In a note earlier this month, analysts at HSBC said that a longer night session for currency trading can give market participants more flexibility, and therefore incentivise more global use of the RMB.

An increase in the CNY trading volume outside regular Asia hours may provide more guidance on CNH trades and narrow the onshore-offshore spread. There are now yuan trading sessions from 9.30 am to 11.30 pm.