A company formed and operated by the People Bank of China, the China Foreign Exchange Committee (CFEC), has enacted a proposal to put a check on speculative forex trading by Banks in China, even as the yuan surges to a six-year high against the U.S. dollars and other peers.
CFEC Urges Caution Concerning Trading Volume at the Proprietary Desk
CFEC urges that there should be a review by banks, especially when there is a significant deviation of trading volumes at proprietary desks from the norm and also how to better manage risks. They affirm that a 50 percent increase in proprietary trading from the year-earlier quarter is classified as “not normal”. They also encourage those referred to as lenders to take lesser risks in trading Forex personally and for customers.
The caution from CFEC is that the Chinese government is no longer fascinated by the recent surge in the value of the yuan. Though the yuan is performing best in the 2021 emerging market, it is a result of exportations and investment from abroad in onshore bonds. Against all its peers, the yuan attained a six-year high since 2015 when Beijing’s growth was a priority which led to the devaluation of the yuan.
Beijing Is Set for a ‘Quasi-Stagflation’ Period
In other news, the Chinese economy is set to commence a period known as “quasi-stagflation”, which is characterized by creeping growth and extremely high inflation from producers as reported by PBOC adviser, Liu Shijin. He said in the China Macroeconomy Online Forum that such an event will likely come to pass if demand doesn’t increase, products maintain a high price, gains of companies are cut short, and there is an indiscriminate release of economic risks reports. Such a situation needs close monitoring and attention because it will persist into the year 2022 if it commences, he says.
The yuan is set to nosedive as a result of caution and limits from the government.
Note: Forexschoolonline.com is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results.
Leave a Reply