The China Foreign Exchange Trading System is planning to boost liquidity in the country’s forex market by introducing market makers for the first time, Reuters reported. Under proposals submitted for approval to the State Administration of Foreign Exchange, the rule allowing banks to quote a price for either selling or buying only would be relaxed to allow some banks to quote bid and offer prices at the same time.
However, market sources expected that the new system would apply to trading of the yuan against the euro, yen and Hong Kong dollar but not against the US dollar, since the central bank keeps a tight rein on that exchange rate. China’s interbank foreign exchange market is based in Shanghai and, as forex deals are driven mainly by trade, dollar/yuan trading accounts for more than 90 per cent of daily volume.
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