After the reform of the Chinese Yuan exchange rate last month, China's central bank has taken another step to establish a more mature domestic financial market.

As a result, the People's Bank of China announced Tuesday that more banks would be allowed to trade yuan forwards, and trading in Yuan currency swaps would be launched in China.

The central bank said that the forwards trading would be expanded to all banks, including foreign-owned banks that have licenses to settle foreign exchange deals and to trade the derivatives.

Banks will be allowed to set their own rates independently. Forwards allow companies or banks to lock in an exchange rate for a foreign currency payment at a specified future date, and swaps act as another tool for hedging against moves in exchange rates or interest rates.

These two derivatives will help companies to hedge increased risks from foreign exchange market.

Source: cctv.com