Hong Kong's Treasury Market Association (TMA) has announced the launch of a daily fixing for the exchange rate of the offshore renminbi (CNH) against the US dollar.
The daily calculation of the US$/CNH spot fixing benchmark will begin on 27 June. Compiled by financial data provider Thomson Reuters from prices contributed by15 global and regional banks, the fixing is calculated by averaging the middle quotes after excluding the highest two quotes and lowest two quotes from the rates provided by the contributing banks. It will be published daily at 11.15 Hong Kong time, providing a reference rate for the pricing of renminbi products in the offshore markets.
“The availability of a representative fixing will be conducive to further development of renminbi products in Hong Kong, which will be an essential element for the further expansion of Hong Kong's RMB offshore businesses,” said Lawrence Lam, chairman of the TMA's market practices committee.
The development of CNH-denominated instruments is seen as significant to Hong Kong's long-term future as China's leading international financial centre.
The TMA, Hong Kong’s banking industry group, includes among its aims the promotion of “the profile of Hong Kong as the preferred hub” for treasury market businesses in the Asia Pacific region.
Generating renminbi issuance capabilities is a key plank of the Hong Kong Exchanges and Clearing's current three-year plan, which aims to prepare the venue for increasing competition from mainland Chinese exchanges Shanghai and Shenzhen. In April, Hong Kong's first renminbi-denominated IPO, Hui Xian Real Estate Investment Trust, raised CNH 10.5 billion (US$1.6 billion).
In 2010, trade settled in the Chinese currency and handled by banks in Hong Kong amounted to 369 billion yuan (US$57 billion) equivalent to 73% of mainland China's total trade in Chinese yuan. In the first quarter of 2011, this ratio increased to 86%, according to the Hong Kong Monetary Authority.
China's currency is referred to both as the yuan and the renminbi (which translates as ”the people's currency'). Its official abbreviation is RMB, but is also commonly abbreviated to CNY, while CNH is often used to refer to the offshore deliverable market in Hong Kong.