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Chinese Banks May Become Market Makers

From Associated Press

Regulators may let China’s four biggest state banks become market makers in U.S. dollar trading, paving the way for less currency intervention by the central bank, a state-run newspaper in Shanghai reported Monday.

A market maker agrees to act as either a buyer or seller in a financial transaction when no other party can be found. The People’s Bank of China, the central bank, is China’s key market maker in U.S. dollar trading because of tight restrictions on foreign-exchange dealings.

Draft measures for expanding the number of market makers for U.S. dollar trading have been completed, and the State Administration of Foreign Exchange -- China’s top foreign exchange regulator -- will decide when to announce them, the China Business Post reported.

China tightly controls trading in its currency, the yuan, and sets its value within a narrow band at about 8.28 yuan per U.S. dollar. The reported plan to allow more market makers would not directly affect the yuan’s value. But it is part of a broader series of reforms aimed at eventually loosening restrictions on currency trading.

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