Move meant to boost global use of yuan
China's foreign exchange market will "soon" extend the trading hours for the yuan to 11:30 p.m. Beijing time (3:30 p.m. GMT) to overlap with European trading hours, three sources with direct knowledge of the matter said on Wednesday.
The change is seen helping Beijing advance its project to encourage more international use of the yuan and support China's case for the IMF to include the yuan in its currency basket.
"The move will be a big boost to the yuan's inclusion in the IMF's special drawing rights (SDR) basket," said Joey Chew, Asian currency strategist at HSBC in Hong Kong.
"The IMF has mentioned that it had concerns on yuan liquidity during London trading hours because it calculates the foreign exchange (FX) value of SDR basket currencies at 12:00 p.m. London time when there is no trading in China's onshore market at present."
The China Foreign Exchange Trade System, managed by the People's Bank of China, currently closes at 4:30 p.m. Beijing time (8:30 a.m. GMT).
That has kept the onshore market out of sync with London, a major center of offshore yuan trade, and has also given offshore markets a window to trade on policy changes announced after domestic markets are closed.
"The change will make the yuan move more in line with international markets, in particular European markets, and will make it more convenient to absorb international reactions to China's policy changes, which are typically announced after the Chinese markets close," said a senior trader at a Chinese commercial bank in Shanghai.
The sources declined to be named due to the confidentiality of the matter.
President Xi Jinping is due to visit London next week, where UK officials hope to attract Chinese investment and win concessions for British firms - including banks - in the Chinese mainland.
However, it is unclear how much real impact the extended hours would have on investor sentiment in the near term.
Offshore markets in Hong Kong - the largest center of offshore yuan trade - have struggled in the aftermath of a surprise devaluation of the yuan in August. That left investors worried that economic growth was slowing down faster than previously thought and that other devaluations may follow. Most foreign investors are unable to access the onshore forex market, limiting hedging and arbitrage opportunities.
