China Regulator to Launch Yuan Forex Options

SHANGHAI—China said it will allow yuan foreign-exchange options to be traded domestically starting in April, a long-awaited move to give companies more hedging ability that is part of Beijing’s broader push to build a more sophisticated currency regime.

Chinese authorities have rolled out a raft of changes in recent months to give businesses more tools to guard against changes in the value of the yuan. The government also is expanding the use of the currency outside China for both trade and investment, steps toward its goal of eventually transforming the yuan—long traded only inside China—into a major global currency.

Ultimately, the recent changes could make it easier for the government to allow faster appreciation of the yuan, which has strengthened 3.6% against the dollar since Beijing unpegged it from the dollar in June—a far slower rise than the U.S. and other foreign governments want. Beijing fears that a faster rise would hurt its exporters. Allowing options gives those companies a better tool to hedge against that risk. Ultimately, the pace of the yuan’s rise is a sensitive political decision made at the highest level in China, and there are no solid indications authorities are ready to let it move more quickly.

The State Administration of Foreign Exchange’s statement on Wednesday said that starting April 1 banks will be allowed to trade options among themselves and to sell them to customers. Businesses will be allowed to buy options from banks, but not to sell them unless they are trying to exit from an option bought earlier.
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