China Said to Ask Banks to Test Longer Yuan Trading Hours

Updated on
  • Lenders told to conduct test-runs till 11:30 p.m. in Shanghai
  • Possible extension of hours to support global usage push

Chinese authorities have asked some banks to conduct test runs for longer trading hours for the onshore yuan, according to people familiar with the matter who asked not to be identified as the matter hasn’t been made public.

QuickTake The People’s Currency

The China Foreign Exchange Trading System has told the lenders to run trading tests from 9:30 a.m. to 11:30 p.m. in Shanghai during the Dec. 23-30 period, the people said. Some banks have also been asked to evaluate their market-making systems on Dec. 24, 28 and 29. The onshore yuan’s trading currently ends at 4:30 p.m. local time. CFETS didn’t say when or whether it will extend trading hours, the people said.

“China will likely extend the trading hours very soon, probably early next year, now that the authority will be testing the system,” said Li Bo, Shanghai-based chief investment consultant at GF Securities Co. “The currency has gained reserve status, so it needs to be accessible to foreign investors outside of regular Asia hours.”

An extension will support China’s push to increase global yuan usage after the International Monetary Fund decided to admit the currency into its Special Drawing Rights. The reserves basket is made up of the greenback, euro, yen and British pound, and their value is calculated daily in dollar terms using midday exchange rates in London. The IMF said in August that a market-based representative yuan rate would be needed for the currency’s inclusion.

China will improve its foreign-exchange system in the coming year, while making its monetary policy more flexible and fiscal policy more forceful, according to statements released at the end of the government’s Central Economic Work Conference on Monday. Against the backdrop of a slowing economy, the yuan will remain under pressure early next year, Ken Cheung, a Hong Kong-based strategist at Mizuho Bank Ltd., wrote in a note.

CFETS didn’t immediately reply to a fax seeking comment on the tests.

— With assistance by Tian Chen, and Ran Li

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