The offshore renminbi (CNH) reached its strongest point against the dollar since the start of the year on Thursday, despite China’s sovereign rating downgrade last week. Analysts say the sharp turn reflects Chinese regulators’ determination to keep the currency from falling ahead of renewed pressure from external factors.
There was little understanding among market watchers to news that the Chinese central bank is planning to introduce a counter-cyclical component to the calculation of the daily fix of the onshore RMB (CNY). Analysts say the move contradicts earlier statements from the PBoC about giving markets more say in the exchange rate.
A new formula to determine the daily renminbi fix could be a prelude to more exchange rate policy reform from China, said HSBC.
The RMB has remained stable in the currency markets so far this year, but the rest of 2017 may turn out to be more rocky depending on policy developments in the US, according to financial industry experts.
The friendly meeting between US president Donald Trump and his Chinese counterpart Xi Jinping last week has ushered in warmer relations, with Trump stating on April 12 that the US Treasury will not label China a currency manipulator. Meanwhile, the two sides are working on a framework for greater market access to be delivered in just over three months.
The first meeting between new US president Donald Trump and his Chinese counterpart Xi Jinping starting Thursday could prove fateful for the bilateral relationship and China's renminbi, with the outlook remaining cloudy on what the US president's next moves might be.
The Hong Kong Stock Exchange (HKEX) launched USDCNH options on March 20, the first currency options to trade on the exchange. Together with HKEX’s USDCNH futures contract, the new product will give investors an alternative in managing renminbi exposure.
A foreign institutional investor completed its first hedging transaction in the onshore FX derivatives market on March 13, following the liberalisation by the State Administration of Foreign Exchange introduced at end of February.
Renminbi depreciation has been one of the market's most talked about issues with many predicting the trend to continue well into 2017. But ICBC Asia’s co-head of global markets Jimmy Jim told GlobalRMB that such fears are overblown and he believes the renminbi is maturing into a two-way fluctuating currency.
The Hong Kong Exchange traversed a difficult financial year, marked on the one hand by sagging trading on the Stock Connect, and on the other a surge in RMB FX derivatives activity. For 2017, HKEX’s chief executive Charles Li said more RMB products are in store.
The State Administration of Foreign Exchange (Safe) has followed up on a promise made at the end of last year, announcing on Monday that foreign institutional investors are now allowed to enter the onshore FX derivatives market.
China is understood to have tweaked its renminbi fixing mechanism by reducing the reference window of the baskets of currencies it tracks.
ICBC (Asia) has begun offering 24-hour CNH prices for its clients, become the first Chinese bank to quote offshore renminbi all day.
While all eyes are focused on the Brexit process, the Bank of England (BoE) has quietly begun publishing numbers that support London's claim to be the leading RMB hubs in Europe. Meanwhile, market participants continue debate the relevance of the upcoming China-London Connect scheme.
After taking a beating in 2016, many are expecting the renminbi to fall further against the dollar this year. But few market watchers expect another sharp depreciation, with some believing the RMB may have already reached the bottom.
Donald Trump could end up being China’s best friend following his comments this week that the dollar is too strong. If the US president elect decides to engineer a weaker dollar, it would help solve China’s most imminent issue — capital outflows.
Hong Kong Exchanges and Clearing (HKEX) plans to introduce options on the Chinese renminbi currency, as well as a US dollar/offshore renminbi contract, having gained approval from the Securities and Futures Commission of Hong Kong.
Promoted By CGIF
Promoted By Euromoney Country Risk
Want full access to GlobalCapital?
If you are new to GlobalCapital or you already subscribe to some of our channels you can still easily extend your access.
Take a trial to the entire site or subscribe online to see all our capital markets news, opinion and data sets.
Don't miss out!Free trial
Read the magazine on your mobile device
GlobalRMB Panda Bonds league table
|Rank||Arranger||Share % by Volume|
|2||China Merchants Bank Co||22.73|
|3||China CITIC Bank Corp||19.23|
|4||Industrial and Commercial Bank of China (ICBC)||8.74|
|4||Bank of China (BOC)||8.74|
Panda Bond Database
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||12-Jun-17||China Traditional Chinese Medicine Holdings||China||2,000|
|2||22-May-17||CITIC Bank International||China||3,000|
|3||19-May-17||China Power New Energy Development Co||China||800|
|5||25-Apr-17||CAR Inc||Hong Kong||300|
Offshore RMB Bond Top Bookrunners
|Rank||Bookrunner||Share % by Volume|
|2||Bank of China (BOC)||10.06|
Latest Offshore RMB Bonds
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||01-Jun-17||Ocean Wealth (Parent: China Orient Asset Management)||China||632|
|2||11-Apr-17||Bank of China Johannesburg Branch (BOC Johannesburg)||China||1,500|
|3||22-Feb-17||Ocean Wealth (Parent: China Orient Asset Management)||China||850|
|5||04-Nov-16||China Nuclear Engineering Group||China||1,500|