More Capital Controls in China

The currency devaluation has been a source of concern for investors as Chinese authorities tighten capital controls, curbing the purchase of outbound assets by restricting portfolio and foreign direct investment. There will also be greater scrutiny of high-value deals by the State Administration of Foreign Exchange (SAFE).

Outbound investment deals reached US$530.9 billion in the first nine months of the year, according to Thompson Reuters data.

“In the face of the recent wave of yuan depreciation, regulators have stepped up capital control measures by introducing a new policy directed a curbing Chinese investors’ portfolios and foreign direct investment from  feeding the frenzy,” Stephen Innes, senior trader at Canada-based OANDA, said in a morning note.

Currency traders are cautious as the US dollar continues its bull run and interest rate yields rise.

The Opec deal to cut oil production, announced on Wednesday, pushed US Treasury yields higher as inflationary expectations grew, according to Innes.

“Coupled with stellar US economic data, it lit a fire under the USD,” he said.

The sell-off of the yuan and other emerging market currencies will intensify as a result, Innes said, which will accelerate mainland demand for US dollars.

South China Morning Post

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

Latest posts by Stephen Innes (see all)