Swiss Forex broker Dukascopy is about to axe the maximum leverage for yuan trades, explaining the change with high volatility and probability of low liquidity on USD/CNH currency pair during the coming time.
The broker noted that there is a high risk of significant price gaps, which may lead to negative equity on client accounts.
As a result, Dukascopy Bank and Dukascopy Europe will be implementing a maximum leverage for USD/CNH exposures of 1:10 as of January 15, 2016 at 11:00 GMT. The change in USD/CNH leverage will apply as of today – January 12, 2016, to accounts without USD/CNH exposure at present.
Traders are asked to take the pending changes into account and to adjust their USD/CNH exposure accordingly if necessary.
The broker also asks traders to note that swaps in USD/CNH have seen a dramatic price shift from less than 10 pips last week to above 100 pips as of today.
The past week has been dynamic for the Chinese currency, as Beijing allowed the biggest fall in the yuan in five months, fuelling volatility and pushing global stock markets down as investors feared this could lead to more competitive currency devaluations.
Meanwhile, the Chinese State Administration of Foreign Exchange (SAFE) said it would beef up internal risk control measures, while speeding up efforts to accelerate the development of the nation’s FX market.
You can view the announcement from Dukascopy on the leverage changes by clicking here.