CNH Tracker-Booming offshore yuan trading would get boost from SDR inclusion

jueves 4 de junio de 2015 03:37 GYT

By Michelle Chen

HONG KONG, June 4 (Reuters) - The volume of Chinese currency traded in the offshore market has risen sharply in the past year, after more than 10 offshore yuan hubs were set up and more players switched to using it for payments and settlements.

Daily transactions of the so-called CNH on currency trading platform EBS have increased by over 50 percent in the last six months and by approximately 200 percent in the past year, according to Jessica Roberts, EBS head of CNH.

The yuan is now one of EBS' top five traded currencies, whereas it was in the top 15 in 2013. The majority of yuan trading volumes continue to be in Asia, Roberts said.

Traders estimate volumes of CNH spot are around $20 billion a day, almost doubling the level at the beginning of the year, and if yuan forwards and other derivatives are included, could reach $40 billion.

The flourishing CNH FX market comes at the expense of the yuan non-deliverable forwards (NDF) that used to be popular among corporates and speculators with limited channels to hedge yuan currency risk.

NDF contracts, betting on the future performance of the yuan and settled in U.S. dollars, are not an ideal hedging tool due to huge basis risk - the difference between the actual yuan spot rate and the midpoint fixing set by the central bank.

Market participants say the yuan is likely to receive a stronger boost as the International Monetary Fund (IMF) is considering including the "redback" in its SDR basket and is expected to make a decision by the end of this year.

Finance chiefs from the Group of Seven industrial nations agreed on Friday that including China's renminbi in the International Monetary Fund's currency basket is desirable, but a technical review must be completed first.   Continuación...