China Introduces 20% Margin on Yuan Futures

China has tightened controls on trading in its yuan to discourage speculators after a decline against the dollar amid a tariff dispute with Washington fueled fears of a damaging outflow of capital from the world’s second-largest economy.

Traders must post a 20 percent deposit starting Monday for contracts to buy or sell yuan on a future date. That raises the cost of betting it will drop and might help to discourage speculative trading.

The tightly controlled yuan has been allowed to decline by about 8 percent against the dollar since early February.

That helps Chinese exporters that face U.S. tariff hikes by lowering their prices in dollar terms. But it also encourages investors to shift money out of China, which would have a broader impact by raising financing costs for other industries.

On Friday, the yuan slipped to a 13-month low of 6.91 to the dollar, close to the highly symbolic level of 7, before strengthening to 6.83 after the margin requirement was announced.

The deepening U.S.-Chinese tariff fight prompted suggestions Beijing might weaken the yuan to help exporters. But analysts say the decline has been driven mostly by China’s slowing economic growth and the diverging direction of U.S. and Chinese interest rates.

via Mainichi

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