Deutsche Bank has launched offshore yuan (CNH) trading on its electronic FX trading platform, Autobahn FX.
The bank says the launch will help contribute to the development of the CNH FX market by growing market participation through exposure to its global FX client base.
Since July 2010, investors have had the option of trading the yuan freely without limits in Hong Kong when China relaxed its currency rules as part of a drive to increase the international use of its currency.
Because there are still controls on transferring currency between Hong Kong and China, yuan in Hong Kong can trade at a slightly different rate. As a result, market participants have begun calling yuan traded in Hong Kong “CNH” to differentiate from Chinese yuan, or “CNY”.
A Deutsche Bank spokesperson says, “CNH is the most significant market development Asia has witnessed in recent years. Today’s launch makes trading CNH more convenient for our corporate clients in Asia and around the world, while helping to broaden the pool of market participants.”
Daily trading volumes in USD/CNH have grown from almost zero in June 2010 to an equivalent of $600 million of spot transactions and $300 million of swaps, according to Deutsche Bank’s estimates.
Over the same period, CNH deposits have grown to RMB 314.9 billion while trade settlement volumes have grown to RMB 100.9 billion, according to The Hong Kong Monetary Authority.
Jens Scharff-Hansen, co-head of FX trading for Asia at Deutsche Bank, says the addition of CNH to Autobahn FX will help to build market liquidity and assist in the development of CNH as a trade settlement currency.
“As with any market, broadening participation is critical for building liquidity and improving market efficiency. We have already seen strong growth in daily trading volumes of CNH and while these remain small compared with onshore CNY trading volumes, the growth trajectory is very strong,” he says.