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Offshore yuan market takes shape with first daily FX fixing
June 27, 2011 / 4:38 AM / in 6 years

Offshore yuan market takes shape with first daily FX fixing

HONG KONG, June 27 (Reuters) - The yuan was set at 6.4753 to the U.S. dollar in the Hong Kong offshore market on Monday, the first-ever such fixing for the Chinese currency in a move that banks hope will help further deepen the burgeoning market and spawn more trading instruments.

The daily yuan fix in the CNH offshore market is seen as a key step because it gives banks a common rate on which to base the trade and settlement of a wider variety of products, especially derivatives such as FX options and interest-rate swaps.

The fix for the dollar/yuan offshore rate -- known as CNH market to distinguish it from the mostly closed CNY onshore market -- at 11 a.m. local time each day from rates provided by 15 banks .

Hong Kong’s Treasury Markets Association launched the fix last week. Thomson Reuters is the calculating and distributing agent for the fixing rate on the menu page .

Activity in the offshore yuan market has soared this year, with surging yuan deposits in Hong Kong spurring daily currency trading estimated at about $1 billion each day and sparking a flurry of bond issues.

Beijing has promoted the offshore yuan market as a way for its big companies to settle trade in its local currency and help wean the economy off its reliance on the dollar.

But Chinese authorities have also sought to limit speculation on yuan appreciation in the fledgling market.

Last week China’s central bank tightened controls on the offshore yuan market, requiring that offshore banks settling trade in CNH tighten checks on whether currency transactions are tied to real trade and asking the banks to check for “abnormal” deals.

Banking and regulatory sources in Hong Kong have told Reuters that China is working behind the scenes to tighten the screws, trying to shape the structure of the market through derivatives regulation and financial bureacracy. (Reporting by Eric Burroughs; Editing by Ramya Venugopal)

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