FX:
The PBoC's renminbi fix against the dollar was set at 6.8956 this morning, up 25bp from Friday. In the spot market, the CNY was trading at 6.8962 as of 10.50am, with the CNH at 6.8964, up 0.04% and down 0.02% from their previous close, respectively, according to Bloomberg data.
The dollar index was trading at 99.069 as of 9.49am, down 0.01% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.73 on Monday, down 0.02% from its previous close.
The trade-weighted index by CFETS closed at 92.78 on April 28, down 0.2% from the previous week, with the BIS basket and special drawing rights basket at 93.72 and 94.21, down 0.3% and 0.6%, respectively.
The volume of transactions in the Chinese forex market stood at Rmb14.18tr in March, with Rmb11.90tr taking place in the interbank market, according to the State Administration of Foreign Exchange (Safe). This puts the total of forex market transactions in Q1 2017 at Rmb33.83tr.
Regulators:
Pan Gongsheng, head of Safe, chaired a meeting to discuss systemic risk in the financial system last week, according to an online announcement by Safe. The meeting emphasised the need to carry out tougher punishments for violations of the law in the forex market and to create a benign environment for the real economy. The Safe meeting echoed Chinese president Xi Jinping’s recent order to financial regulators to close loopholes in the financial system at a politburo meeting on April 25.
RMBi:
Bank of China issued Rmb253.9bn of new loans onshore in Q1 2017, marking a 3.39% rise from the last quarter of 2016, according to the bank’s Q1 results. Releasing the figures on April 28, the bank also said it is maintaining its lead in renminbi internationalisation, claiming that it is the number one bank globally for cross-border renminbi clearing and settlement in terms of scale, although the bank did not back this claim up with a figure in its report.
Hubs:
Renminbi deposits in Hong Kong fell to Rmb507.3bn in March, marking a 0.8% monthly fall, according to figures released by Hong Kong Monetary Authority (HKMA). The total remittance of renminbi for cross-border trade settlement amounted to Rmb312bn in March, compared to Rmb238.3bn in February.
Although the figures marked the nineteenth consecutive month of fall in renminbi deposits in Hong Kong, Tommy Xie, economist at OCBC, said this may finally reverse as China eases capital controls.
“As PBoC loosened its grip on renminbi cross-border payments and the concerns about renminbi risks are easing, we expect renminbi deposits in Hong Kong to stabilise in the coming months,” said Xie.
Hong Kong maintained the world’s largest renminbi liquidity pool in 2016, according to HKMA’s annual report for 2016, published on April 28. The report noted that Hong Kong’s renminbi settlement system registered an average daily turnover of Rmb860bn, and that it remains the world’s largest offshore renminbi bond market, recording Rmb318.8bn worth of outstanding dim sum bonds in 2016.
Trade:
People’s Daily has criticised US president Donald Trump’s plans for tax reform. In a commentary article on April 28, the Communist Party’s mouthpiece said the US president is starting a tax war, which might lead to competition for tax cuts among developed economies. The comment came as Chinese foreign minister Wang Yi met with his US counterpart, Rex Tillerson, where the pair discussed the rising tensions on the Korean Peninsula.
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