China OKs Trading of Foreign Currencies
03.08.2005, 05:29 AM
China will allow limited trading of foreign currencies - such as U.S. dollars for euros - beginning in May as it gradually loosens tight market controls, Dow Jones Newswires reported Tuesday.
China now only allows trading of its own currency - the yuan - against the U.S. dollar, euro, Hong Kong dollar and Japanese yen, and only for foreign trade purposes.
Under the planned expansion, eight foreign currency pairs will be allowed to be traded domestically, the China Foreign Exchange Trade System said in a statement responding to questions from Dow Jones.
The changes will help banks with their foreign exchange investment and hedging needs as well as "easing appreciation pressure on the yuan," the CFETS said.
It will also help traders prepare for the day when China allows more trading of the yuan, it said.
The yuan is fixed at about 8.28 to the U.S. dollar. China's trading partners have complained that the policy makes the yuan artificially weak and gives Chinese exporters an unfair advantage. The United States, in particular, has called on China to allow its currency to trade freely.
The eight foreign currency pairs are the U.S. dollar against the euro, against the Australian dollar, the British pound, Japanese yen, Canadian dollar, Swiss franc and the Hong Kong dollar and the euro against the yen.
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