China to limit currency hedging

In a move designed to quash speculation that China will continue to revalue its currency, Chinese financial regulators have enacted new rules to limit indirect hedging of the Yuan. Apparently, many businesses with operations in China had been delaying payments to their American suppliers, with the expectation that another revaluation of the Yuan would indirectly lower their payment obligations. As a result of the new rules, these accounts payable will now be treated as foreign exchange accounts and will be subject to certain rules and fees. The Wall Street Journal reports:

Friday’s move also suggests Beijing sees signs that companies continue to position themselves for a further movement beyond July’s 2.1% revaluation of the Yuan, as the US and other governments pressure Chinese authorities to do more.

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