(Bloomberg) — An organization formed by key participants in China’s currency market urged banks to limit speculative foreign-exchange trading after the yuan climbed to a six-year high versus peers.

According to sources familiar with the issue, the China Foreign Exchange Committee was established under the guidance of the central bank. It encouraged banks to remain risk-neutral in trading foreign currency for their clients and themselves. People familiar with the matter said that banks were advised to improve their risk management and track proprietary trading.

Beijing may be becoming more uncomfortable as a result of the rapid rise in yuan. It is one of the most successful currencies in emerging markets, thanks to strong exports as well as foreign investments in offshore bonds. Last week, against a variety of trading partners the yuan rose to its highest point since 2015, when authorities devalued it to encourage growth.

According to the CFEC, banks should conduct an internal review if trading volume at their proprietary desks is significantly different from normal. The people asked not for anonymity because it’s a private matter. A 50% increase in proprietary trading volume over the same period last year, or a 15-fold increase in transactions for clients, could be considered unusual, the people said. The CFEC requires banks to submit their findings.

The proposal is targeted at more than 50 Chinese and overseas banks operating onshore, and covers over 90% of the country’s foreign-exchange market, the people said. They added that it will have no impact on the liquidity of the currency market.

The measures aim to strengthen standards for banks’ foreign-exchange businesses, especially proprietary desks, which tend to make speculative bets on one-way moves in currencies, the people said. 

The People’s Bank of China last week asked financial institutions and enterprises to step up exchange-rate risk management and to refrain from making one-way bets on the yuan. The PBOC stated that currency volatility could increase as foreign central banks adjust monetary policies. This statement was made at a recent meeting of the CFEC.

China needs to intensify market-oriented currency rate reform, which would include making the yuan rates more flexible. The PBOC reiterated this in its third-quarter policy execution report, released Friday night. 

Although the PBOC is more open to yuan volatility over recent years, Beijing may become uncomfortable if it causes damage to exports or poses a threat financial stability.

“At a time of slowing growth and a likely moderation in exports ahead, the strength of the yuan is likely becoming a growing concern,” said Mitul Kotecha, chief emerging markets Asia & Europe strategist at TD Securities in Singapore. He said that this is another way to limit speculative pressure upon the yuan after weaker fixings, and likely currency intervention.

The PBOC established a reference rate for the yuan of 6.3952 USD, lower than an average estimate of 6.3931 from a Bloomberg survey. This is in line with the consensus of traders and analysts who surveyed PBOC. That’s the third straight session of weaker-than-expected yuan fixing. As of 9.52 AM in Shanghai, the yuan was unchanged at 6.3906

Reuters reported earlier that the CFEC proposed a plan to limit trading volumes at Chinese banks’ proprietary desks. This organization was founded in 2016 and includes representatives of financial institutions as well as regulatory agencies. 

CFEC said it wasn’t immediately ready to comment on the proposal when reached by phone Monday morning.

(Updates with the yuan fixing as of 11th paragraph

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