China suspends yuan trading by DBS, StanChart

An employee at a currency exchange in Hong Kong counting 100-yuan banknotes.
An employee at a currency exchange in Hong Kong counting 100-yuan banknotes.PHOTO: BLOOMBERG

The mayhem over the yuan seems to have entangled DBS Group, Standard Chartered Bank and Deutsche Bank, which have all been suspended from conducting some of their businesses related to the Chinese currency, reports said yesterday.

The temporary bans are likely a move by the Chinese central bank to clamp down on excessive speculation in the yuan, analysts said.

DBS, StanChart and Deutsche are known to have sizeable yuan trading operations. All three banks declined to comment.

China began suspending banks from settling offshore clients' yuan transactions in the onshore market last month.

The difference in value between the onshore and offshore yuan has been widening, hitting a four-year high earlier this week. This makes it profitable for banks and their clients to buy the yuan outside China and then sell it in Shanghai.

The onshore yuan, used within China itself, is quite tightly controlled by the central bank, which occasionally intervenes in the market.

This week, the bank is widely thought to have stepped in to prop up the value of the onshore yuan.

It takes a more hands-off stance towards the offshore yuan - traded in hubs such as London, Hong Kong and Singapore - so its value tends to be more market-driven.

At the start of the week, the offshore yuan was 2 per cent weaker than onshore yuan, spurring traders to buy offshore and sell it onshore.

"From the (central bank's) perspective, they want the flows to be genuine and related to the economy, rather than speculative. There is quite a lot of speculation in the market now," said OCBC Bank China economist Tommy Xie.

According to a Bloomberg report, StanChart has appealed to China's central bank to shorten its ban, imposed last month and running through March.

DBS' ban is shorter than three months, the report added.

Spokesmen for OCBC Bank and United Overseas Bank told The Straits Times they faced no suspension, and their yuan trading businesses are proceeding as normal.

Investors have also been selling down the yuan amid its rapid decline, leading to massive capital outflows from the country. The currency fell to a five-year low against the US dollar yesterday.

A version of this article appeared in the print edition of The Straits Times on January 08, 2016, with the headline 'China suspends yuan trading by DBS, StanChart'. Print Edition | Subscribe