This week in renminbi: February 6, 2017
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This week in renminbi: February 6, 2017

Great_Wall_Monday_230px

Chinese markets are back, with previous interventions by the regulators still paying off in the offshore RMB spot markets, while Dubai's exchange saw growing interest in RMB futures contracts in January 2017.

FX:

The week starts off with People's Bank of China setting the dollar mid-point 50bp weaker at 6.8606. The spot markets in Chinese were trading close to the fix, with the onshore RMB (CNY) at 6.8584, 0.21% stronger, as of 11.20am, according to Wind data. Meanwhile, the offshore RMB showed no signs of halting its appreciation streak, trading at 6.8027, after closing 2016 as low as 6.9695, a 2.2% move.

The CFETS index closed last week at 94.03, losing another 0.1% from a week earlier, while the special drawing rights (SDR) and the Bank for International Settlements indices stood at 95.43 and 95.26, up 0.1% and down 0.3% respectively.

Chinese foreign ministry spokesperson Lu Kang has rejected US president Donald Trump’s recent criticism of China for manipulating its currency. Speaking in a media briefing session last Friday, Lu said China has never sought to manipulate the renminbi as a means to gain an advantage in trade and also has no intention of sparking a currency war. He did, however, concede that there are clear issues in China/US trade relations.

China's foreign exchange markets, meanwhile, saw turnover in January 2017 fall to its lowest in 11 months. Overall turnover was $397.6bn, down 47.6% from a month earlier, according to CEIC data, probably due to the early Lunar New Year festivities this year. Some 97% of the trading activity - or $385.7bn - was taken up by dollar trading, with the euro in second place with $5.9bn, down 23.4%.

The Treasury Markets Association set the overnight CNH Hibor at 3.08% on Monday, down from 3.81% on Friday.

Hubs:

The Dubai Gold and Commodities Exchange saw RMB futures contracts attracting growing investor appetite in the month of January 2017, with the contract becoming the one with the highest monthly average open interest of 436 contracts, the exchange said on February 5.

State Administration of Foreign Exchange (Safe) director of current account management department Guo Song said in an interview with ChinaForex that onshore accounts can now participate directly in Hong Kong IPOs if they are acting as cornerstone investors. Guo explained that in order for an onshore investor to do so subject to an FX purchasing quota, they must first agree to remit the money back to China once they have reduced or exit their stake in the company. In addition, the company itself must also agree to remit parts of the proceeds back to China once the listing is completed.

Coming up:

PBoC will disclose data on its foreign exchange reserves for the first month of 2017 on February 7, a key data point in gauging the extent of remaining capital outflow pressure.

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