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January 23rd 2006

OTC Yuan trading system takes shape

Last year, over $300 Billion in currencies were traded via China’s foreign exchange market. 98% of this trade, however, involved China’s official interbank market, in which buyers and sellers are matched up in a centralized system. This will soon change, however, as China prepares to open the new market, in which currency trading will be facilitated by 13 banks, including five that are foreign. The Central Bank will continue to set the so-called parity price and control the Yuan exchange rate via calculated intervention. However, as part of the new system, private market-makers will have more discretion in setting prices, which could spur further Yuan appreciation. AFX News limited reports:

One analyst noted that current prices are not necessarily indicative of future trends on the two markets. “The key thing is now is they’ve got a market. People are going to push the envelope a little bit and…test the limits a little bit more,” he said.

Read More: China mulls upper tier of market makers in new OTC market

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Posted by Adam Kritzer | in Chinese Yuan (RMB), Investing & Trading | 1 Comment »

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One Review of “OTC Yuan trading system takes shape”

  1. HouseTaker Says:

    yuan is still too risky to trade; i think the major implication of this will be the boost it gives to the private banking sector in china, which probably will affect international commerce and hence will impact both FDI and china’s currency reserves. if these end up being significant, they’ll end up in the charts.

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