2011-11-22

Hong Kong yuan trading limit doubled

China doubles HK yuan swaps to offer relief valve
The expansion will also boost confidence that Beijing intends to internationalise the yuan, which took a knock in recent weeks as trade limits between Hong Kong and the mainland were hit and offshore yuan prices diverged significantly from onshore prices.
The offshore yuan and bond market took a knock in recent weeks as the offshore price deviated as much as 3 per cent from mainland prices, an unwelcome fluctuation for many companies that rely on thin margins.
First takeaway: currency reform continues, a long-term positive for China. Second: the Hong Kong yuan fell against the Mainland yuan, it did not rise. Expanding swaps makes the yuan more attractive in the long-run, but the short-term impact is small.

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