Four banks approved for forex forwards
(Shenzhen Daily/Agencies)
Updated: 2005-09-08 14:53

China has granted approval to another four banks, including three foreign lenders, to conduct onshore foreign exchange forwards trade in the yuan, a move to help spur trading of the new instruments.

The three overseas banks were the Shanghai branches of JP Morgan Chase and Japan's Sumitomo Mitsui Financial Group, and the Beijing branch of Deutsche Bank AG, the China Foreign Exchange Trade System said Wednesday.

The fourth was Export-Import Bank of China, one of the country's three policy banks, the exchange said in a statement.

The new batch followed 14 banks, including nine foreign lenders such as Citigroup Inc, HSBC Holdings Plc and Standard Chartered, which became the first batch to be designated as onshore forwards traders in August.

China launched the forwards August 15 to provide a benchmark for local expectations of the yuan's longer-term appreciation after the central government revalued the yuan by 2.1 percent July 21 and dropped its peg to the US dollar.

Since the revaluation, the government has pledged a slew of reforms, such as allowing banks to trade yuan forwards and swaps with each other on the interbank market for the first time.

One-year onshore forwards, launched August 15 to provide a benchmark for local expectations of the yuan's longer-term appreciation, were quoted at 7.8413 versus the US dollar Wednesday morning, indicating that the market expects a 3.1 percent appreciation of the yuan in a year's time, according to the exchange's data.

Trade has been extremely sluggish in onshore forwards as the domestic market becomes accustomed to the unfamiliar product.

Investors speculating on a rise in the value of the yuan had turned previously to offshore nondeliverable forwards. One-year onshore forwards closed at 7.8413 to the dollar Wednesday.

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