[originaltext] Pushing China’s foreign exchange reform ahead by another step

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. It hopes that this 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.
    In spot dealings, the yuan closed at 8.08 to the dollar on Thursday. Analysts said that it wasn’t clear exactly what system 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.
    That would have the effect of removing yuan from the money market. At the same time, the central bank could use the swap rate to signal its expectations about how fast it expects the yuan’s value to rise, they said.
    Tile swap deal didn’t seem to have any immediate effect on the spot market.
    Late Thursday, China’s State Administration for Foreign Exchange announced it would also introduce a new currency trading system allowing bank market members to trade directly with each other. It also invited qualified members to apply to become market makers for yuan spot trading.
    A market maker agrees to act as either a buyer or seller in a financial transaction when no other party can be found. Currently, the central bank is China’s key market maker in U.S. dollar trading due to tight restrictions on for eign exchange dealings, though regulators earlier announced they were considering letting other banks become market makers.