Investors will monitor the yuan’s movements on Monday, after the People’s Bank of China announced a rule change that made it cheaper to short the yuan.
Traders short the yuan when they expect the currency to weaken in future. One way to do so is to borrow in yuan in hopes of buying it back at a lower price later and pocketing the difference.
The central bank announced Saturday that financial institutions now no longer need to set aside cash when conducting some foreign exchange forwards trading, with effect from Monday. Previously, financial institutions had to set aside 20% of the previous month’s yuan forwards settlement amount as foreign exchange risk reserves.
In Monday morning trade, the onshore yuan changed hands at 6.7224 per dollar, as compared to levels below 6.7 against the greenback seen last week. Meanwhile, its offshore counterpart last traded at 6.7188 per dollar.