Articles tagged by RMB
EBS BrokerTec and Icap Information
Services (IIS) have launched EBS CNH Benchmark, the first fully electronic,
trade-backed reference rate for the offshore Chinese renminbi (CNH) market,
according to Icap.
The benchmark is published daily at 16:30
Beijing/8:30 GMT, and is timed ...
The Chinese Renminbi has seen a slight slowdown in terms of global payments by value in June, being surpassed by the Canadian dollar and standing as the sixth most popular currency, according to Swift.
Swift data shows that the RMB ...
The Chinese offshore convertible renminbi
cannot currently be considered a safe haven currency, and neither does it
appear to be on the path of becoming one, a study published by the Federal
Reserve Bank of Dallas suggests.
The study analyses ...
The executive board of the International
Monetary Fund (IMF) has amended its rounding methodology for determining
currency amounts in the Special Drawing Right (SDR) basket.
The decision, reached July 20, was in order
to “make it less complex and also to ...
from Swift shows that in July RMB bounced back to its position as the fifth
most active currency for global by payments by value, with a share of 1.90%, a
slight increase from 1.72% in June 2016.
the data shows that ...
With new data showing that RMB trading grew 81.8% over the past three years, Galen Stops looks at the continued development of the currency and the growth of FX trading in the APAC region.
The growth of Chinese renminbi (RMB) trading in the global FX market has been well documented by a variety of sources, whether anecdotally by traders, logically by economists or quantifiably by trading venues and other data providers.
It was therefore no surprise when the latest Bank for International Settlements (BIS) triennial survey showed that the average daily turnover of RMB has grown from $120 billion in 2013 to $202 billion as of April 2016, an 81.8% increase.
HSBC Bank (China) has been appointed as the onshore custodian bank for BlackRock, which has been granted approval by Chinese regulators to use the RMB to directly access China’s onshore securities market.
Blackrock is the first US-based institutional investor to obtain a Renminbi Qualified Foreign Institutional Investor (RQFII) license.
The RQFII programme provides global investors with direct access to invest into China’s capital markets. In June 2016, China allocated to the US a milestone RQFII quota of RMB250 billion, the largest quota globally outside of Hong Kong.
Last year the FX market was highly event driven, with periods of sustained low volatility occasionally punctuated by large but episodic market moves.
Looking ahead to 2017 and there are already clearly some events set to take place that have the potential to drive further bursts of volatility, namely the invocation of Article 50 by Britain to begin its exit from the European Union and the scheduled political elections in France, Holland and Germany.
In addition, the change of policy direction expected under US Presidential-elect, Donald Trump, and the US Federal Reserve’s indication at the end of 2016 that it currently plans to raise rates three times this year are expected to be major drivers of the currency markets in the coming year.
The Chinese authorities face a range of challenges as they seek to protect the economy in the face of downward RMB pressure.
In 2016 the Chinese authorities are assumed to have intervened in the currency markets, not in order to depreciate the RMB but actually to maintain the value of the currency.
“The consensus from economists is that there’s going to be downward pressure on the RMB,” noted Shawn Baldwin, chairman of AIA Group, on the opening panel at Profit & Loss Shanghai.
Despite a bearish outlook on China and its currency right now, panellists at Profit & Loss Shanghai claimed that in the long-term, the fundamentals are in place for RMB development.
While China’s economy continues to enjoy growth rates that most fully developed economies could only dream of, the slowing of this growth rate has led to negative sentiment about China from some international investors.
“The perception outside of China about China’s economic rebalancing is very critical right now,” said Ivan Shi, a director at Z-Ben Advisors.
Bloomberg is continuing its push into China with the announcement that Haier Finance has adopted its FX electronic trading platform (FXGO) and Multi-Asset Risk System (MARS).
A subsidiary of the Chinese home appliance company Haier Group, Haier Finance provides financial services including deposits and loans, financial advisory, insurance and investment services. The firm officially adopted FXGO and MARS in the third quarter of 2016.
"Bloomberg's FX solutions have enhanced our efficiency by allowing us to streamline our workflow from front to back," says Zhang Bing, head of trading at Haier Finance.
When assessing which large tail risk events are likely to take place in 2017, speakers at Profit & Loss’ Forex Network London emphasised that there are other risk factors being overlooked that might have a greater impact on financial markets.
“Like last year, the tail risks this year are quite high compared to normal,” said Colin Harte, strategist and senior portfolio manger at BNP Paribas Investment Partners. “There are some quite material risks that – if they come to pass – could have a significant impact on markets.”
He noted, however, that many of the expected tail risk events from 2016 were less dramatic than expected in the end: sterling took an obvious hit after the Brexit result, but soon became range-bound again, while the Trump election victory actually led to a rally in the equity markets.
Celent has released a report today that documents the progress being made in the internationalisation of the renminbi (RMB), and outlines the opportunities that this represents for market participants, as well as the challenges it presents.
Discussing how investment managers can benefit from RMB internationalisation, the report says that they should consider adopting new strategies to respond to greater short-term volatility in the currency.
It notes that investment managers have traditionally looked to gain from China’s one-way currency appreciation and hold bonds till maturity.
“But Chinese regulators’ abandonment of circuit breakers and other protective measures means traditional expectations of regulatory intervention may not hold going forward, opening up more opportunities for short-term price fluctuations,” says the report.
R5FX and the Shanghai Clearing House (SHCH) will launch a new electronic marketplace next month, in a move which will enable Chinese banks to directly trade offshore RMB with London for the first time.
The platform, called Connect, is due to go-live on 18 December – following confirmation from the People’s Bank of China. Eight Chinese banks will be participating from launch, with further banks and institutions to be added at a later date.
The products available for trading in this first phase will be USD/HKD, GBP/USD and EUR/USD. Profit & Loss understands that CNH and the remaining G10 currency pairs may also be added towards the end of Q1 2018.
Profit & Loss understands that Darryl Hooker, global head of metals and spot and head of FX EMEA at NEX Markets is leaving the firm.
Hooker, who has been with the firm for 18 years having joined its predecessor Icap in 2000, is believed to be leaving this week.
Hooker was co-head of EBS Brokertec Markets before the rebranding to NEX, having also served in a variety of roles including global head of new and emerging markets. During the latter he helped drive the project to establish EBS as the prime ECN for Chinese renmimbi business.
The total volume of FX futures traded on SGX in July was 1.7 million, down 8% month-on-month, despite the exchange seeing record volumes in its USD/CNH futures.
Although volumes were down last month compared to June, they were still up 124% year-on-year. The monthly decrease appears to have been driven by a decline in volumes on SGX’s INR/USD futures, with trading down 23% m-o-m but still up 81% y-o-y.
The bright spot for SGX in July was trading on its USD/CNH futures, as a record $61.5 billion in notional was traded on these contracts, bringing the total volume of these contracts cleared to over $255 billion this year.
Greater automation in emerging markets is widely seen to be merely a matter of time. Profit & Loss talks to Darryl Hooker, former co-head of EBS Brokertec Market and currently consultant at Capitolis about his experience in helping bring a larger ‘e’ focus to Russia and China.
Profit & Loss: Can you give us an insight into the thinking that saw you focus on first Russian markets and then China when you were at EBS? What are the main signals that identify a frontier market ready to move into the mainstream of EM?
Darryl Hooker: A common pitfall in emerging markets is to make the mistake of considering them collectively despite the fact that they have very particular and specific nuances.
China has fundamentally changed its approach towards RMB internationalisation, according to BNP Paribas China’s chief China economist, XD Chen.Speaking at a briefing in New York today, Chen explained that for the past five years the authorities in China had one main policy stance regarding the renminbi: to promote the internationalisation of the currency.However, he then added: “But now this policy stance, in our observation and together with our policy consultation, is no longer. In other words, they’re not going to use the government’s force to promote renminbi internationalisation, instead they will follow market forces.”
Traiana is now providing direct central clearing connectivity to the Hong Kong Exchanges and Clearing’s (HKEX) OTC Clearing Hong Kong (OTC Clear).Market participants can now access HKEX’s OTC Clear service to clear USD/CNH and USD/HKD FX forward and swaps, via Traiana’s Clearing Hub (CCP Connect), which provides affirmation, matching and trade processing.The OTC Clear deliverable FX service can be used to mitigate settlement risk that arises when payments and receipts of currencies occur at different intervals during a standard bilateral settlement process. The service can also be used to offset settlement exposure with its clearing house cross currency swaps service.
There’s something for everyone in this week’s In the FICC of It podcast as Colin Lambert and Galen Stops traverse the US legal system, trading, crypto and China.
Listen in as Lambert explains why he is mystified at the prosecution’s flip-flop in the Mark Johnson case and angry at the FX industry’s previous lack of effort to explain how markets work to the US legal authorities; and Stops takes a look at a new report n his favourite industry – CTAs. Having had the data explained to him, Lambert also thinks he knows why some CTA sectors are doing well and some aren’t, so that’s another of his “theories” then…
Our podcasters then move onto debate whether crypto markets will evolve to an OTC model and whether this would be a good thing for attracting institutional money to what is still a relatively nascent market.
Stops closes out by reporting from an analysts’ briefing this week that highlighted a change in approach on the part of China to its programme of liberalisation of the yuan.
Aside from what one news service decided was the headline – more like click bait – “FX Volumes Slump Globally” (guess what, yes, there was a dip from April, but on a more considered year-on-year basis FX turnover is up 8.9% at the third highest mark ever), there were actually a few interesting snippets in this week’s FX committee surveys. The two that stood out for me were the surge in RMB trading and a quite remarkable resurgence for the voice brokers in the UK.
Chinese RMB-denominated government and policy bank securities are set to be added to the Bloomberg Barclays Global Aggregate Index.The inclusion in the index will start in April 2019 and be phased in over a 20 month period.When fully accounted for in the Global Aggregate Index, local currency Chinese bonds will be the fourth largest currency component following the USD, EUR and JPY. Using data as of January 24, 2019 the index would include 363 Chinese securities and represent 6.03% of a $54.07 trillion index upon completion of the phase-in
Scepticism abounds in this week’s In the FICC of It podcast as Colin Lambert and Galen Stops take a look at the latest bank to unveil a digital markets strategy – including all your favourite buzzwords. While Stops believes this is the latest move in what will be a growing trend, our podcasters also wonder whether it’s not really just a rebranding exercise?
They then move into more traditional areas and discuss JP Morgan’s survey on FX market conditions, and while they agree with a lot of the findings, there are one or two areas that raise an eyebrow, not least around internalisation and AI.
AI-generated trading and liquidity are also the forefront as they move on to share their thoughts around the flash crash in Jardine Matheson stock last week in Singapore, including asking the question, what does it mean for market maker programmes and certain order types?
The discussion then moves on to look at the latest FX turnover surveys from the world’s FX committees, with particular attention on three interesting/puzzling (delete as appropriate) elements of the UK report surrounding RMB, NDFs and voice brokers.
The podcast ends on with Lambert praising “the optimism of youth” after Stops highlights what he thinks could be a very important line at the end of the latest document detailing an FX-related fine in the US – in other words, the cynic in him won the day!