Economics
China Aims to Cool Yuan’s Surge by Reducing Cost of Shorting
- Policy makers to lift reserve rule on currency forwards
- The yuan strengthened almost 2% on Friday after holiday break
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China’s policy makers acted to restrain a rally in the yuan by removing rules that made betting against the currency expensive.
Financial institutions will no longer need to set aside cash when purchasing foreign exchange for clients through currency forwards, effective from Monday, according to a statement from the People’s Bank of China on Saturday. Banks previously had to hold 20% of sales on some foreign exchange forward contracts, a move imposed two years ago when the currency slumped toward 7 per dollar.