China Foreign Exchange Market to Extend Yuan Trading Hours

China Foreign Exchange Market to Extend Yuan Trading HoursThe foreign exchange market in China will be extending its trading hours for the yuan until 11:30 pm to overlap with the European trading hours. Sources with knowledge on the matter said that the change is expected to help China to advance its project and encourage more international use of the yuan and at the same time support China’s case for the International Monetary Fund to include the yuan in the currency basket.

The move also boosts the yuan’s inclusion in the IMF Special Drawing Rights baskets, which compromises the dollar, euro, sterling and yen. The IMF mentioned several concerns on the liquidity of the yuan during London trading hours since it calculates the foreign exchange value of the SDR basket at 12 pm London time when there is no trading in the onshore market in China. The China Foreign Exchange trade System that is managed by the central bank close at 4:30 pm keeping the onshore market out of sync with London. Dealers from Chinese banks said that the change would give the international and Chinese markets chances to react together to certain events.

Offshore yuan trade through London is booming and one major venue for banks to trade currencies with each other and the yuan is now the third most traded currency after euro and the yen. Some of their in house data showed the daily trade in the offshore market a year ago tended to peak around 2300 GMT the start of the Asian day, instead sees a biggest spike when London starts trading. Trading in London said that extension will not affect the market immediately since the currently trade the yuan through offshore market and via non deliverable forwards as foreign traders cannot directly access the onshore currency.

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