The Defense of Seven Escalates

CNBC: Chinese central bank to issue bills in Hong Kong for the first time

China's central bank said on Wednesday that it will issue a total of 20 billion yuan ($2.87 billion) of bills out of Hong Kong next month, its first issuance in the former British colony, the world's biggest offshore yuan clearing center.

The People's Bank of China (PBOC) said it will issue 10 billion yuan in three-month bills and 10 billion yuan in one-year bills in Hong Kong on Nov. 7.

Authorities say the issuance is aimed at expanding the range of yuan-denominated products of high credit rating in Hong Kong and improve the yuan yield curve. The issuance will also help the PBOC manage the yuan's liquidity in the offshore market and guide market expectations.

The onshore yuan ended domestic trading on Tuesday at 6.9613 per dollar, the weakest such close since May 20, 2008. The Chinese currency has lost more than 6.5 percent of its value to the dollar since the beginning of this year.

"While the volume is quite small — 10 billion yuan at the 3-month tenor and 10 billion yuan at the one-year tenor - this clearly signals that China's central bank is very keen to stabilize its currency especially at 7.00 hurdle," said Zhou Hao, senior emerging market economist at Commerzbank in Singapore.

By soaking up yuan funds in Hong Kong, the issuance of PBOC bills can help increase interest rates in the offshore yuan market and the cost of shorting the yuan.

iFeng: 刚喊话完人民币空头，央行“稳汇率”新工具下周将面世

This is the first time that the central bank issued a central bank bill in the offshore market. With the renminbi approaching the key “psychological position”, it has a strong signal meaning of stabilizing the foreign exchange market.

Previously, the central bank has repeatedly stated that it has and will continue to actively adopt macro-prudential policies and other measures to stabilize the foreign exchange market expectations, and is “experienced” and “sufficient tools” in this regard.

...Looking into the future, the industry believes that there may be a time course for the RMB exchange rate to stabilize effectively. However, the direction is clear. With the support of fundamental support and counter-cyclical adjustment, the RMB exchange rate will not be out of control, and it is only time to stabilize. The problem, the market should also take a rational look at the phenomenon of the appreciation and depreciation of the renminbi.