FX:
The People’s Bank of China's renminbi fix against the dollar was set at 6.8947 on Monday morning, up 63bp from Friday. In the spot market, the CNY was trading weaker at 6.9057 as of 10.05am, with the CNH at 6.9076, down 0.04% and 0.11% from their previous closes, respectively, according to Bloomberg data.
The dollar index was trading at 98.766 as of 9.54am, up 0.12% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.86 on Sunday, down 0.01% from its last close.
The trade-weighted index by CFETS closed at 93.00 on May 5, up 0.02% from the previous week, with the BIS basket and special drawing rights basket at 93.88 and 94.04, up and down 0.02%, respectively.
Regulators:
Safe released its monthly statistics for China’s FX reserves, which grew by $20.4bn or 0.7% to $3.03tr in April. This marked the third consecutive month of growth in FX reserves. Safe attributed the growth to more balanced capital flows in and out of China, and the appreciation of non-dollar currencies against the dollar in the international financial markets.
Safe’s head Pan Gongsheng said China will not devalue the renminbi to increase the country’s competitiveness, according to media reports. Pan said PBoC has a dual mission of providing easier access to cross-border trade and preventing shocks caused by cross-border capital flows to hit the financial system, but it does not need or wish to remain competitive via currency devaluation.
Greg McKenna, chief market strategist at AxiTrader, noted that Pan’s remarks and the latest FX reserves figures should assuage market fears on the RMB.
“That’s a sign that authorities really have got capital flows under control and represents another thing markets don’t have to worry about.”
Hubs:
The Singapore Exchange released its monthly statistics for April, showing that USDCNH futures volume was 77,506 — down 22% month-on-month and up 202% year-on-year. Meanwhile, FTSE China A50 Index futures remained the most active contract on SGX with volume of 5.19m, down 9% month-on-month and down 15% year-on-year.
Derivatives:
The Hong Kong Exchange is planning to launch CNH and USD denominated gold futures in Q3 2017, subject to regulatory approval, according to a circular by the bourse on May 5. The contracts, which will be physically settled, will be the first such pairing on the same exchange platform in the world.
"The CNH contract will be a valuable addition to our expanding portfolio of renminbi products,” said Li Gang, HKEX's co-head of market development. “The contract's synergy with our USDCNH futures and other renminbi derivatives will create arbitrage opportunities."
Agricultural Bank of China and China Bond Insurance Co have issued the first credit linked notes (CLNs) in the interbank market, raising a total of Rmb500m ($72.5m), according to the National Association of Financial Market Institutional Investors ( Nafmii ). The one year notes were registered with Shanghai Clearing House on May 3-4, and began trading on May 5. Investors who bought the CLNs included Bank of Shanghai, China Bond Issuance Co and China Minsheng Bank.
Trade:
China’s finance minister has said that US-China trade disputes should be resolved via co-operation, according to local media. Speaking at a seminar in Beijing on May 7, Zhu Guangyao said China will not actively seek a trade surplus with the US, and noted that China and the US have already begun dialogue to resolve disputes over trade. Zhu added that US-China co-operation should not be limited to trade, but should include everything from infrastructure and fiscal to monetary policies.
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