U.S. Broker Said to Close Hong Kong Dollar Trades, Restrict Yuan

  • FXCM cites the possibility of turmoil, liquidity shortage
  • Brokerage will also adjust margin rules for all currencies

U.S. foreign-exchange broker FXCM Inc. will stop trading the Hong Kong dollar and limit positions for the offshore yuan against the greenback on concern volatility will increase, according to people familiar with the matter.

The New York-based firm will close all open positions on Hong Kong’s exchange rate by Feb. 26, said the people, who asked not to be identified because they aren’t authorized to speak publicly on the matter. It will also adjust margin requirements for all currencies after close of business on Jan. 29 East Coast time. FXCM cited the possibility of turmoil and shortage of liquidity in the Hong Kong dollar and offshore yuan in the coming weeks, the people said.

Volatility in the two currencies has increased in the past six months amid efforts by China to overhaul its foreign-exchange policy even as its economy grows at the slowest pace in 25 years. Offshore yuan funding costs jumped to unprecedented levels this month as the nation drained liquidity to fend off short sellers.

FXCM lost more than $200 million after the Swiss central bank let the franc trade freely against the euro on Jan. 15 last year. An FXCM representative confirmed the move to step out of the Hong Kong dollar when reached via live chat on the company’s website. An e-mail sent to the firm after U.S. business hours wasn’t immediately returned. The people who spoke to Bloomberg News didn’t give details on the offshore yuan limit.

The offshore yuan has dropped 0.7 percent this year to 6.6179 a dollar as of 3:46 p.m. in Hong Kong, while the city’s dollar has fallen 0.5 percent to 7.7899.

— With assistance by Justina Lee, and Steven Yang

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