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Deutsche Bank Makes Use of Frankfurt RMB Clearing Hub

Deutsche Bank says it has effected its first renminbi transaction via Frankfurt’s offshore clearing centre as it seeks to help corporate customers save costs when doing cross-border business with China.

“Companies from Germany and other European countries can now conduct RMB transactions cleared in Frankfurt via their house banks,” says Werner Steinmueller, head of global transaction banking at Deutsche Bank. “The advent of RMB clearing in Frankfurt will help to promote German-Chinese trade, and Deutsche Bank is proud to be part of this journey.”

He adds, “By invoicing in RMB, corporates can save costs and gain operational efficiencies when doing cross-border business with China. This often results in savings that they are able to pass onto customers.”

Bank of China, chosen by the People’s Bank of China in June to clear payments in Frankfurt, spent five months building the infrastructure to facilitate settlements before the official start of clearing last week (17 November).

The clearing bank makes it easier for German lenders and their clients to access the RMB and cut costs by making euros directly convertible with the Chinese currency without having to be changed into US dollars first.

China is actively promoting the use of its currency and has taken considerable steps to facilitate the settlement of cross-border transactions in RMB, which should lead to a rise in the number of companies using the currency. The RMB is already the world’s seventh most frequently used payment currency, according to global payment services company Swift.

Other banks said to have cleared transactions through the Frankfurt hub include Commerzbank, DZ Bank and Landesbank Hessen-Thueringen Girozentrale.

Sydney Renminbi Hub Becomes Reality

The Reserve Bank of Australia (RBA) and the People's Bank of China have agreed to establish renminbi (RMB) clearing arrangements in Australia.

According to the RBA, this will allow more direct trading with Chinese entities and support the economic and financial links between Australia and China.

"The renminbi is expected to dominate Asian trade and could become a genuine rival to the US dollar as a global reserve currency," says ANZ CEO, Mike Smith.

Russia’s Forex Bill Finally Passes Second Reading

Russia’s Forex Bill has been passed in its second reading, having been repeatedly postponed for nearly a year and a half since its first reading in 2013.

The Council of the State Duma, the lower chamber of the Russian parliament, says that on 21 November it was decided to propose the adoption of the bill on second reading.

Russia currently has no FX regulations in place but the number of fraudulent FX brokers is on the rise with an increasing number being blacklisted.

However, the market is concerned about the bill’s proposed tightening of minimum capital requirements to obtain a Russian FX broker license in addition to a new requirement that brokers actually own their trading software.

The bill has moved closer to becoming law, possibly early in 2015.

Economists Voice Concern Over Brazil’s Future

Economists are predicting that the Brazilian real could come under further pressure as the government struggles to cope with the scandal surrounding oil giant Petrobras and a potential rates hike in the US.

Directors at Petrobras, one of the largest an most internationally recognised firms in South America, stand accused of taking bribes from construction companies and funneling funds to parties of the ruling coalition.

Speaking about the scandal at the G20 summit in Australia Brazilian president, Dilma Rouseff, said: "This may change the country forever".

“Political use of Petrobras, then only blamed because of the artificial lid on gas prices to curb inflation, is now the source of an immense scandal the like of which the world has never seen. For the first time ever, names and bank accounts have been given, a dozen tycoons arrested and almost $500 million in assets frozen. The situation is so dire that the auditors refused to sign on the balance sheet,” says one source based in Sao Paulo.

“And this is just the beginning. At least 70 politicians are named in a confidential file being scrutinised by the Supreme Court. And questionable decisions by [former president] Lula and Dilma regarding the management of huge Petrobras investments are now seen as suspicious indications that they knowingly failed to act against the criminals who plundered the company to finance their political base. Oil prices may not be the only thing falling.”

The source predicts that the fall of Petrobras is imminent and that this will have significant implications for the country. “Investment grade is at serious risk. Class action suits against Petrobras are almost certain. Government involvement in criminal activities is a whistleblower statement away. The central bank keeps selling dollar swaps to avert a stampede, but the losses are mounting and the storm is still gathering. Will the dam burst?”

Last week the Brazilian real hit a nine-year low against the dollar, and Bob Savage, CEO of CCTrack Solutions, says that the failure to carry out structural reform in the countries financial systems could cause problems when the US increases its interest rates.

“When interest rates go up, they’re going to have to pay more, their growth rate will go down and this will cause more political trouble. Some of these issues were highlighted in the taper tantrum last year,” he says.

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