Currency swaps hint at China exchange reform – AP

From AP, via Chicago Tribune:

Pushing China’s foreign exchange reform ahead by another step, the central bank on Friday carried out its first currency swap deals with local banks in a move that could help bring more flexibility to the market.

The People’s Bank of China confirmed that it was carrying out its first foreign exchange swap deal on Friday, but would not give more details. A Beijing-based trader for a major state-owned bank said that the central bank offered one-year currency swaps worth $6 billion at 7.85 Chinese yuan per dollar.

Analysts said that it wasn’t clear exactly what mechanism the central bank was using in its swaps transactions, but said it could be selling dollars and buying yuan on the spot market, and a year later could reverse the deal at the set rate.

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