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China shows composition of currency basket
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China shows composition of currency basket |
| SHANGHAI, - China disclosed for the first time Wednesday the composition of the basket of currencies used to set the yuan's value, saying it mainly includes the dollar, euro, yen and Korean won.
The currencies of Singapore, Britain, Malaysia, Russia, Australia, Canada and Thailand are also considered in setting the yuan's foreign exchange rate, Zhou Xiaochuan, the central bank governor, said during a speech to launch a new operations center for the People's Bank of China in Shanghai.
China's central bank also said Wednesday that it will tighten oversight of the country's foreign exchange markets while moving to liberalize its currency trading regime.
The statement came a day after it announced Beijing was expanding the country's foreign-exchange forwards business and launching currency swaps.
On Wednesday, the bank said it was also allowing nonbanking firms to trade in its onshore foreign exchange market and was launching foreign-exchange forwards on the domestic interbank market.
While widening currency trading onshore, the bank said it would strengthen its oversight and management of the market "to guarantee stable, orderly market operations and maintain the basic stability of the yuan exchange rate at a reasonable, balanced level."
The central bank said the new rules allowing broader use of foreign exchange derivatives were aimed at meeting the need to hedge foreign exchange risk following the July 21 revaluation.
"The timing and conditions are ripe for expanding the forex forwards business and launching the swaps business," the People's Bank of China said in a statement.
The new rules allow all domestic banks to seek approval for conducting forwards trading. Financial institutions given that approval will be qualified six months later to begin swaps business. The new rules also expand the range of forwards trading allowed.
However, the central bank said swaps of the yuan against foreign currencies couldn't involve the exchange of interest rates, implying the transactions wouldn't leave loopholes for trading of interest rate swaps.
Foreign banks also will be allowed to provide the derivative products to their clients.
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