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Saturday, February 18, 2006

Chinese Financial Markets

I may be in India but I can still write about China....

Last July China revalued the currency (from 8.28 to 8.11 to the US dollar) and now floating the currency against a basket of currencies (versus directly pegged to the dollar). This move increased the risk of foreign currency for many businesses operating in China. The People's Bank of China (PBC) is urging firms to hedge against foreign exchange risk. Also, this past week (on Feb 10), the first ever RMB interest rate swap transaction was completed. Finally, a new financial derivatives futures market is being established in Shanghai.

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