Regulatory authorities have taken new steps to enhance the flexibility of the foreign exchange market and boost risk management at financial organizations. The most recent measure raises the lower limit on general foreign exchange market positions. While there is no fixed limit for the market as a whole,the State Administration of Foreign Exchange sets position limits based on each bank's own trading record as well as foreign exchange payments and receipts data. If,for example,there is an upper limit of US$1 billion and a lower limit of negative US$1 billion - there are in fact limits of long or short positions of $1 billion.

The move followed an increase in the upper and lower limits of such positions in foreign exchange settlement and sales in early 2015.

An official of the State Administration of Foreign Exchange said the expansion of the upper and lower limits in foreign exchange settlement and sales will enhance the market's "self-adjusting" capacity. It will accelerate the formation of a market which can determine prices,adjust for risk and find equilibrium levels. In so doing,it can help provide better financial services for corporates and other entities to guard against exchange rate risks.

Additionally,a method of what is called balance settlement for forward foreign exchange settlements and sales has been put in place. This has been added to full-amount settlement and the two are transaction mechanisms for market entities to manage cash flows in foreign currencies and exchange rate risk.