China currency market crackdown sees regulators restrict trading in US$30 trillion market, sources say

Banks and traders are feeling the pinch as Beijing steps up scrutiny of forex dealers and attempts to curb financial risks it sees as potential threats to the economy

Representatives of China’s State Administration of Foreign Exchange (SAFE) have embedded themselves on currency trading floors, market-making-bank insiders say

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In recent months, many Chinese banks have withdrawn individual forex trading products, closing another avenue for speculation. Photo: AP

Published: 4:25pm, 29 Sep 2021Updated: 4:24pm, 29 Sep 2021

As part of a sweeping push to curb speculation, China’s regulators are tightening control over the inner workings of its currency market, pressuring banks to trade less and in smaller ranges, two banking sources told Reuters.

The moves follow recent attempts to curtail financial risks, such as by dampening commodity price rises, banning cryptocurrency transactions and restricting property speculation. They also bring the campaign deeper into day-to-day operations on the trading desks of a US$30 trillion market.

Additionally, it serves as the latest example of scrutiny focused on foreign exchange, which analysts said might be aimed at tightening the leash on the yuan at a sensitive time when US policymakers prepare to withdraw monetary stimulus and China seems poised to add more.

Reuters reported two weeks ago that brokers had dropped currency forecasts following regulatory pressure. Authorities have also been hinting that banks and companies should prepare for volatility.

In recent months, many banks have also withdrawn individual FX trading products, closing another avenue for speculation.