Foreign exchange markets are set to get a boost in the coming months after a deal to curb US currency trading by the Chinese government was announced by President Donald Trump.
Read moreChina will allow foreign companies to open a subsidiary in its market-making division to take on foreign trading activities.
This will allow them to avoid being taxed on the profits they make, which could be a boon to US companies.
China is the world’s biggest exporter of foreign exchange and its foreign exchange holdings have increased from $3.5tn to $5.6tn during the first quarter of 2017, according to data from Bloomberg.
China has made no secret of its desire to curb the yuan, and has repeatedly threatened to introduce capital controls to restrict the flow of capital to the country.
It is a strategy that has been welcomed by Wall Street, which sees the move as a way to curb inflation and help the yuan weaken.
But the moves are being met with scepticism, as the yuan has lost ground in the past year against the US dollar.
The market is already seeing a price correction.
It has fallen from $US1.2585 to $US2.3185 on Wednesday and $US0.7765 on Thursday.
It’s trading at a low of $US3.15 on Thursday, according on Bloomberg.
“We expect the move will boost foreign exchange prices and help Chinese companies to earn a better return,” said Richard Wojcicki, director of global portfolio management at Citi Global Markets.
“The yuan is not trading at an optimal level yet, so the new tax plan is a welcome move.”
The tax plan will likely benefit the Chinese financial sector, but there are many risks in the plan.
“The tax reform will be announced by Mr Trump on Friday, when he will deliver a speech at the National Prayer Breakfast, and Mr Trump is expected to announce the details of his economic plan later on Friday.
Mr Trump has been widely criticised for his failure to implement the plan, which has left the world trading in uncertainty.
The tax plan was meant to spur growth, but has failed to lift inflation to record lows.
The US stock market fell more than 6 per cent in early trading on Thursday as investors looked to the Chinese economy and the prospect of Mr Trump delivering his economic blueprint.