China said to ask banks to prepare for longer yuan trading hours

BEIJING – China plans to extend the yuan’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalisation push.

Regulators led by the People’s Bank of China (PBOC) have told some banks to prepare for an extension of onshore yuan trading hours, according to people familiar with the matter, who asked not to be identified discussing private information.

The trading will close at 3 am the next day, instead of the 11:30 pm local time, the people said. It’s not known when the change would be effective.

The PBOC had pledged to extend currency trading hours and vowed to further open up the financial market in May after the International Monetary Fund lifted yuan’s weighting in the Special Drawing Rights currency basket. China last tweaked yuan trading hours in 2016 when it extended trading by seven hours.

The PBOC and State Administration of Foreign Exchange (Safe) didn’t immediately reply to faxes seeking comment.

The onshore yuan has depreciated nearly 5 per cent versus the dollar this year as the economy suffers due to Covid-led and as the PBOC’s accommodative stance at a time time when the Federal Reserve is hiking rates drives outflows.

The extension of yuan trading into New York hours could boost China’s foreign exchange trading volume, which dwindled in May due to Covid lockdowns in Beijing and Shanghai. The total volume of interbank transactions of and all other derivatives fell to the lowest in more than a year, according to Bloomberg calculations based on data from Safe.

An increase in the onshore yuan trading volume outside of regular Asian hours may provide more guidance on offshore yuan trades and narrow the onshore-offshore spread, Hong Kong & Shanghai Banking Corp said in a earlier this month.

The onshore yuan advanced 0.1 per cent to 6.6860 per dollar as of 12:37 p.m. local time, while offshore yuan was little changed at 6.6821.

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