Corporates get tough lesson in FX risk from central bank

ndim-2013

Nikunj Sharma
China's central bank is signaling it is abandoning its traditional role in the domestic currency market as the ready supplier of liquidity, forcing corporations to bear more risk so that they learn how to cope with a more volatile yuan.
 
One reason could be to prepare them for a further widening of the yuan's trading limit, which some economists predict will be doubled this year to 2 percent either side of a daily midpoint set by the central bank.At the same time, forcing Chinese corporations to take on more currency risk implicitly makes invoicing and settling trade in yuan directly more attractive because doing so eliminates exposure to exchange rate risks. This advances another policy goal: increasing international use of the yuan in trade.
 
Back
Top