China told banks to prepare for longer Yuan trading

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China told banks to prepare for longer Yuan trading

China Said to ask banks to prepare for longer Yuan trading hours.

As part of its internationalization push, China plans to extend trading hours as it seeks to increase global investor participation in onshore currency trading.

People familiar with the matter said that some banks were told by the People's Bank of China to prepare for an extension of onshore trading hours. They asked not to be identified as discussing private information. The people said that the trading will close at 3 a.m. the next day, instead of 11: 30 p.m. It is not known when the change will be effective.

The PBOC pledged to extend currency trading hours and to further open up the financial market in May after the International Monetary Fund lifted yuan s weight in the Special Drawing Rights currency basket. The further extension of yuan trading into New York hours could boost China's foreign exchange trading volume, which dwindled in May due to Covid lockdowns in Beijing and Shanghai.

The extension of yuan trading hours would help meet increasing demand for yuan transactions, said Ju Wang, head of the greater China foreign exchange and rates strategy at BNP Paribas SA. International investors have increased their exposure to Chinese assets over the past few years, Wang said.

The PBOC and State Administration of Foreign Exchange didn't respond immediately to faxes seeking comment.

The onshore yuan has fallen by nearly 5% against the dollar this year as the economy suffers due to Covid-led curbs and the PBOC's accommodative stance at a time when the Federal Reserve hikes rates drive outflows.

The trading extension could lead to 18 hours of yuan trading in a day, compared to 14 hours currently. In 2016 when it extended trading by seven hours, China changed its trading hours.

Hong Kong Shanghai Banking Corp. said in a note earlier this month that an increase in the onshore yuan trading volume outside of regular Asian hours may give more guidance on offshore yuan trades and narrow the onshore-offshore spread. The onshore yuan was slightly changed at 6.6870 per dollar as of 2: 58 p.m. local time, while the offshore yuan was steady at 6.6816.

A limited group of offshore investors including 55 central banks, 59 offshore participants and 22 yuan clearing banks have been allowed to access China's onshore currency trading as of May. Their trading volume last month was $101.5 billion, accounting for only 2.66% of the onshore currency market.

The extended hours would help Chinese investors who trade global assets hedge their currency risk, BNP spokesman Wang said.

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