China’s central bank announced that it would extend onshore yuan’s trading hours starting on January 4, 2016.
The current trading hours for yuan in Mainland China are from 9:30 a.m. to 4:30 p.m. (Beijing time). After new regime is used next month, the trading hours will be from 9:30 a.m. to 11:30 p.m. (Beijing time). But the spot rate at 4:30 p.m. will still be considered as the day closing price as PBOC explained that most of the trading happens during the daytime and the liquidity tends to be lower at night.
Furthermore, China will allow more foreign institutions to participate in the onshore yuan’s trading when the foreign institutions meet the criteria and receive approval from the China Foreign Exchange Trading System Center (CFETS). The country want to reduce the difference between yuan’s onshore and offshore rates by provide more channels for yuan’s trading.
This is another step for China to internationalize its currency. In recent years, China has gradually promoted its currency to be used to settle trade and financial transactions in global market. Last month Chinese currency yuan was admitted to be one of the Special Drawing Rights by IMF. This development may lead to higher demand for the Chinese currency.
“The trading hours extension is a vital step in bolstering the yuan’s global use as this allows the exchange rate to reflect news taking place outside of Asia hours," said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. "The yuan’s rates at home and abroad will likely converge as well."