Foreign-exchange options will be traded domestically in China from April, offering companies the chance to hedge against renminbi appreciation, the Wall Street Journal reported. This could ultimately allow China’s currency to appreciate more rapidly. The State Administration of Foreign Exchange (SAFE) said that banks will be allowed to trade options between themselves and sell them to customers. Businesses, meanwhile, can buy options from banks, but only sell them if they are exiting an option bought earlier. SAFE added that option purchases by businesses should be based on real need and backed by trade in goods or investments. "It is one of the many necessary steps in China’s plan to gradually introduce more two-way volatility for the yuan so that it can truly vary with a basket of currencies," said Bank of America-Merrill Lynch economist Lu Ting. Last month SAFE allowed banks to trade currency swaps with corporate client in order to better manage currency risk.
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