FX:
People’s Bank of China's renminbi fix against the dollar was set at 6.9042 this morning, down 93bp from Friday. In the spot market, the CNY was trading at 6.9097 as of 10.19am, with the CNH at 6.9102, down 0.13% and 0.20% from their previous close, respectively, according to Bloomberg data.
The dollar index was trading at 101.320 as of 10.09am, down 0.14% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.60 on Sunday, up 0.3% from its previous close.
The trade-weighted index by CFETS closed at 93.22 on April 7, up 0.3% from the previous week, with the BIS basket and special drawing rights basket at 94.23 and 95.10, up 0.2% and 0.07%, respectively.
RMB activity in the Taiwanese FX market had a lacklustre March, according to CEIC data. USDCNH options dropped 50.3% to 1,002 contracts, while options contracts fell from 112 to 44 in the same month.
RMB clearing in Hong Kong recovered in March to its highest level in six months. Total volume was Rmb18.7tr ($2.7tr), up 16.6% on a monthly basis, while clearing in Q1 2017 was down 5% to Rmb49.9tr compared to Q1 2016.
China’s foreign exchange reserves reached $3.009tr in March, increasing by $4bn from February, according to figures released by Safe. Safe attributed the stabilisation of the reserves, which marked an increase for the second consecutive month, to the relatively stable circumstances in the international financial markets.
Julian Evans-Pritchard, economist at Capital Economics, suggested the stabilisation of the reserves is partly due to the fact that PBoC halted its interventions in March, but he noted RMB depreciation expectations had played a larger role in stabilizing FX reserves.
“Although tighter capital controls have played a role in curtailing outflows, the key factor appears to have been the recent stability of the renminbi against the US dollar which has tempered depreciation expectations,” said Evans-Pritchard. “This has been the by-product of a pause in dollar appreciation rather than a change in Chinese policy.”
Regulators:
The head of CIRC, Xiang Junbo, is currently under investigation for a serious breach of disciplinary standards, according to a brief statement by China’s Central Commission for Discipline Inspection.
On April 7, China Banking Regulatory Commission (CBRC) published guidelines for banks to better serve the real economy. The regulator proposed further measures to control real estate loans, pushing forward with debt-for-equity swaps, and increasing loans to smaller businesses.
Trade:
No formal agreement emerged from the meeting between Trump and Xi that concluded on April 7. Xinhua reported that the two presidents discussed trade and national security, and opened formal dialogues between relevant officials in both realms. Trump has also accepted Xi’s invitation to visit China later this year.
Tommy Xie, economist at OCBC, said that while briefings from US and Chinese officials showed a lack of detail on currency and trade policies, the general direction has been set towards reducing the US trade deficit with China. The two countries have also agreed to conduct discussions for a new trade framework within the next 100 days.
“As mentioned by secretary of commerce [Wilbur] Ross that 100 days is a very short time for trade,” said Xie. “[But it was] interesting to mention that Ross said China has expressed interest in reducing net trade balance because of impact on money supply and inflation.”
Hubs:
Hong Kong Stock Exchange is launching its five year China Ministry of Finance Treasury bond futures on Monday. The product is the first listed derivative on Chinese domestic bonds in the offshore markets.
On April 9, Dubai Gold and Commodities Exchange (DGCX) launched Shanghai Gold Futures (DSGC), a renminbi-denominated contract. This is the first time the Shanghai Gold Benchmark Price is being traded in the international markets.
The Shanghai Clearing House will co-operate with Canadian group TMX to explore connect schemes, in order to grant easier access to China’s bond market to Canadian and North American investors, according to the head of the clearing house. Xu was speaking at a forum in Toronto on April 6.
FTSE China A50 Index Futures remained the most active contract on the Singapore Exchange in March, with volume of $5.73m, according to figures released by the exchange on Friday.
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