China said to ask banks to prepare for longer renminbi trading hours

BEIJING (BLOOMBERG) – China plans to extend the renminbi’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalisation push.

Regulators led by the People’s Bank of China (PBOC) have told some banks to prepare for an extension of onshore renminbi trading hours, according to people familiar with the matter, who asked not to be identified discussing private information.

The trading will close at 3am the next day, instead of the 11.30pm local time, the people said. It is not known when the change would be effective.

The PBOC had pledged to extend currency trading hours and vowed to further open up the financial market in May after the International Monetary Fund lifted renminbi’s weighting in the Special Drawing Rights currency basket. China last tweaked renminbi trading hours in 2016 when it extended trading by seven hours.

The PBOC and State Administration of Foreign Exchange (Safe) did not immediately reply to faxes seeking comment.

The onshore renminbi has depreciated nearly 5 per cent versus the dollar this year as the economy suffers due to Covid-19 curbs and as the PBOC’s accommodative stance at a time time when the Federal Reserve is hiking rates and driving outflows.

The extension of renminbi trading into New York hours could boost China’s foreign exchange trading volume, which dwindled in May due to Covid-19 lockdowns in Beijing and Shanghai. The total volume of interbank transactions of spot and all other derivatives fell to the lowest in more than a year, according to Bloomberg calculations based on data from Safe.

An increase in the onshore renminbi trading volume outside of regular Asian hours may provide more guidance on offshore renminbi trades and narrow the onshore-offshore spread, HSBC said in a note earlier this month.

The onshore renminbi advanced 0.1 per cent to 6.6860 per dollar as of 12.37pm local time, while offshore renminbi was little changed at 6.6821.