Hong Kong plans offshore yuan fixing rate
2011-05-16 13:06:08
Hong Kong aims to introduce an offshore spot yuan fixing rate this year, in a move aimed at boosting growth as well as the use of the Chinese currency in one of Asia's hottest financial markets.
Hong Kong, a semi-autonomous Chinese territory which has its own currency, the Hong Kong dollar, has been acting as a test bed for turning the yuan into a global currency.
While yuan-related business has been booming in Hong Kong, a lack of a widely recognised fixing rate for the Chinese currency has held back the growth of yuan financial products.
A spokeswoman for the city's de facto central bank, the Hong Kong Monetary Authority, said authorities are working to create an offshore spot yuan fixing rate this year.
"We are supportive of market initiatives that enhance robustness of the renminbi business development, including the plan of the Treasury Markets Association (TMA) to introduce (yuan) fixing," she said in a statement to AFP, referring to the official name of the Chinese currency.
"The fixing is definitely a prepositioning for the development of these derivative products in the days ahead," Lawrence Lam, chairman of the market practices panel from the city's banking group, the TMA told The Wall Street Journal Monday.
China has pushed for greater use of the yuan abroad in recent years, signing currency swap arrangements with several nations and launching trials for yuan trade settlement with a number of mainly Southeast Asian countries.
Presently, some issuers of offshore yuan options use the Chinese central bank-guided Shanghai fixing, which often trades one to three percentage points higher than in Hong Kong, leading to potential disputes.
The yuan could be fixed using a similar method to that employed in fixing the Hong Kong Dollar, Lam said.
The city's unit is fixed against the US dollar at 11:15 am each day, with the rate determined by averaging the midquotes after excluding the highest three quotes and lowest three quotes from 20 designated banks.
Up to 20 banks will be used to determine the daily offshore yuan reference rate, he said, adding it would be a mix of Chinese, local, Japanese, European and US banks.
In 2009, China approved using the yuan to settle cross-border trade with Hong Kong.
However, the first yuan IPO outside mainland China, Hong Kong tycoon Li Ka-shing's Hui Xian Real Estate Investment Trust, made a limp debut on the Hong Kong stock exchange last month.