Small Exchange: China eases currency controls, crackdown on crypto-trading and India’s forex reserves remain high

Peter Terlato 12 September 2017

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This week's currency news rounded up.

China discontinues forex risk reserve requirements

The People's Bank of China (PBOC) has brought the foreign exchange risk reserve ratio to zero.

PBOC financial research institute boss, Sun Guofeng, announced the policy rollback after the yuan's recent strengthened performance, settling all of last year's losses, Xinhua News reported.

Chinese banks were previously forced to hold over 20% of the previous month's yuan forwards settlement to be used as forex risk reserves. This policy was put in place to prevent the devaluation of China's currency.

The central bank will also scrap the reserve needed for yuan deposits to foreign banks.

These forex capital controls likely helped the yuan to gain 6.7% against the US dollar this year.

PBOC continues crackdown on cryptocurrency trading

A new industry task force, led by China's central bank, has reportedly drawn up rules that would prohibit the operation of local cryptocurrency trading platforms, according to Chinese financial news website Caixin.

However, two of the country's largest digital currency trading platforms, Huobi and BTC China, said they have not yet received any notices of a ban or cessation of practices.

Last week, Chinese authorities outlawed cryptocurrency fundraising strategies, known as initial coin offerings.

Despite the potential implementation of a ban on trading platforms, there are no plans to end non-commercial, over-the-counter transactions of currencies like bitcoin or Ethereum.

Earlier this year, digital currency analytics website Bitcoinity revealed China was responsible for around 90% of global bitcoin trades. Now, China accounts for just over a quarter of the world's bitcoin trading.

South Korea is the latest country to attempt regulating digital currency dealings. The value of cryptocurrencies has surged recently, with the most prominent, bitcoin, breaking the $5,000 barrier for the first time this month.

India's forex reserves almost touch $400 billion

India's foreign exchange reserves closed the week ending 1 September at $398.12 billion, just shy of a record $400 billion.

The latest Reserve Bank of India data reveals a whopping $3.572 billion was added in the week, compared to just $1.148 billion the week before.

Morgan Stanley reports India’s reserves were expected to cross the $400 billion mark for the first time in the week ending 8 September 2017 as a result of high capital inflows and low credit off-takes.

With these funds, India will be able to canvas nearly one full year of imports cover.

Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.

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