Asia-Pacific News

China's PBOC changes currency trading rules: Report

Reuters with CNBC.com
Brent Lewin | Bloomberg | Getty Images

China's central bank said that its planned foreign exchange purchase reserves to be implemented in October will include all derivative products, according to a document seen by Reuters on Wednesday.

Reserve ratios would be set at 20 percent of the nominal value of forwards and swap contracts and 50 percent of the nominal value of principal for options, the document by the People's Bank of China (PBOC) dated on Wednesday said.

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The PBOC declined to comment when contacted by Reuters. China's central bank plans to tighten rules on trading of currency forwards from October, sources with direct knowledge of the matter told Reuters on Tuesday, in a move to curb speculation and volatility after a shock devaluation of the currency last month.

Wednesday's document explained the forwards rules and expanded them to all derivatives.

"Most importantly, in terms of PBOC leadership and PBOC direction in policy, this is a huge backpedaling,"Luis Costa, the head of CEEMEA FX and fixed income strategy at Citi, told CNBC on Wednesday.

"They are pretty much making it a lot more difficult to buy dollars on shore."

He added that the move contradicted the idea that China was ready to free-float its own currency and highlighted the "confusion on policy going forward in China."

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