Chinese state banks anticipate the offshore forex market volatility, A spike higher in the offshore yuan following suspected rare intervention by Chinese state banks is expected to be short-lived, especially with a looming U.S. interest rate rise likely to add to the attraction of owning dollars. People Bank of China will do some act, China yuan want to become safe haven currency
But those betting on a further depreciation in the yuan are likely to have only limited room to push the offshore rate down relative to the onshore rate without drawing the ire of the Chinese central bank and the risk of further state intervention, market sources said. China yuan is the most traded currency, maybe as a Safe Haven Currency for Asian forex market
As reported by Reuters "The central bank will not stand aside if depreciation expectation is formed again and more intervention may happen," said a Hong Kong-based currency trader, who declined to be identified.
Foreign exchange traders explain that The offshore yuan shot up by more than 1 percent on Thursday on suspected intervention that was seen by traders as a gesture by currency authorities to shake out speculators betting against the yuan.
People Bank of China have spent the country's foreign exchange reserves heavily to hold the yuan steady onshore since a surprise devaluation in August prompted fears the Chinese economy was in worse shape than previously thought and that the yuan therefore could fall further.
As we knew that, Thursday's spike narrowed the offshore yuan's discount against the onshore rate to 0.38 percent from 1.56 percent on Wednesday and forced traders with short positions to cover. Traders suspect the sudden move was prompted by buying by state banks at the behest of the central bank.
Safe haven currency The China yuan will remain under pressure as long as U.S. interest rates are set to rise, analysts said. U.S. market rates have already risen in anticipation the Federal Reserve will raise its policy rate by the end of this year for the first time since 2006. Jobs data, inflation, trade balance is already give the good signal
Meanwhile In contrast, the Chinese central bank has cut lending rates five times since last November and analysts expect further easing of monetary policy to support China's economy. And surely to support Beijing mainland stocks
Let's to the mathematics, The interest rate differential will be reflected more in the offshore market, where China's central bank has less influence, analysts said. The offshore yuan was quoted at 6.4150 per dollar late on Friday in Asia, compared with an onshore rate of 6.3740 - a gap of 410 pips. It was 200 pips earlier in the day, but traders said the gap widened after London offshore markets kicked into action. Safe haven currency is the most anticipated currencies
Some emerging markets forex traders believe the central bank will not allow the gap to widen to 500 pips for fear that would strengthen expectations of further yuan depreciation.
Source : Reuters
But those betting on a further depreciation in the yuan are likely to have only limited room to push the offshore rate down relative to the onshore rate without drawing the ire of the Chinese central bank and the risk of further state intervention, market sources said. China yuan is the most traded currency, maybe as a Safe Haven Currency for Asian forex market
As reported by Reuters "The central bank will not stand aside if depreciation expectation is formed again and more intervention may happen," said a Hong Kong-based currency trader, who declined to be identified.
Foreign exchange traders explain that The offshore yuan shot up by more than 1 percent on Thursday on suspected intervention that was seen by traders as a gesture by currency authorities to shake out speculators betting against the yuan.
People Bank of China have spent the country's foreign exchange reserves heavily to hold the yuan steady onshore since a surprise devaluation in August prompted fears the Chinese economy was in worse shape than previously thought and that the yuan therefore could fall further.
As we knew that, Thursday's spike narrowed the offshore yuan's discount against the onshore rate to 0.38 percent from 1.56 percent on Wednesday and forced traders with short positions to cover. Traders suspect the sudden move was prompted by buying by state banks at the behest of the central bank.
Safe haven currency The China yuan will remain under pressure as long as U.S. interest rates are set to rise, analysts said. U.S. market rates have already risen in anticipation the Federal Reserve will raise its policy rate by the end of this year for the first time since 2006. Jobs data, inflation, trade balance is already give the good signal
Meanwhile In contrast, the Chinese central bank has cut lending rates five times since last November and analysts expect further easing of monetary policy to support China's economy. And surely to support Beijing mainland stocks
Let's to the mathematics, The interest rate differential will be reflected more in the offshore market, where China's central bank has less influence, analysts said. The offshore yuan was quoted at 6.4150 per dollar late on Friday in Asia, compared with an onshore rate of 6.3740 - a gap of 410 pips. It was 200 pips earlier in the day, but traders said the gap widened after London offshore markets kicked into action. Safe haven currency is the most anticipated currencies
Some emerging markets forex traders believe the central bank will not allow the gap to widen to 500 pips for fear that would strengthen expectations of further yuan depreciation.
Source : Reuters
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