SHANGHAI, (Reuters) – China’s foreign exchange regulator announced Friday that it will offer new derivatives tools for companies to better hedge currency risk after the recent volatility.

According to SAFE’s notice, the State Administration of Foreign Exchange will make it simpler for banks to do forex derivative business. It also encourages lenders to manage forex risk better.

In a statement, Wang Chunying, deputy chief of SAFE said that the announcement was made to “further increase China’s forex market’s depth and breadth and assist market participants in better managing currency risk.”

In April, the yuan fell 4% against USD, which was a monthly record. It has also fluctuated quite wildly in this month.

SAFE announced that China’s financial institutions, who can currently trade European-style currencies, will soon be able to also trade American and Asian currency options. This allows them to better serve companies’ diverse hedging requirements.

The use of derivatives by banks is encouraged in order to reduce their exposure to forex. Regulators will also allow for more banks to trade forex derivatives.

It stated that it will promote market neutrality, the use of hedge tools and the promotion of market neutrality while disallowing one-way bets on yuan.

SAFE stated that the volume of currency hedge activities using derivatives rose 59% in 2021, compared with a previous year.