Biggest Yuan Reforms in a Decade Did Little for China’s International Monetary Fund Push

The yuan climbed to a seven-week high in Hong Kong’s offshore market yesterday, erasing its discount to the rate in Shanghai, and an overnight rate to borrow the currency jumped by a record amid talk China’s central bank was intervening to back the exchange rate. The onshore yuan was also buoyed by the overnight strength of the offshore yuan on broad dollar weakness, traders said. Friday’s shift brings the USA closer to the positions of the United Kingdom and France, who have favored the yuan being granted reserve status. The PBOC set the midpoint rate at 6.3613 per dollar prior to market open, 0.07 percent firmer than the previous fix 6.366.

HSBC Holdings Plc and Bank of China (Hong Kong) were approved to issue 1 billion yuan and 10 billion yuan of panda bonds, respectively, the People’s Bank of China (PBOC) said last week. Banks scrambled for short-term cash to meet their needs, driving up interest rates. Savings fell 15 billion yuan ($2.4 billion) from July to 979 billion yuan, the Hong Kong Monetary Authority said in a statement on its website on Wednesday. Traders said there were few signs of central bank intervention in trading on Monday after the yuan showed signs of stability over the past couple of weeks.

The market will be closed for one week starting Thursday for the Chinese National Day break.

The onshore yuan sank as much as 3.7 percent to a four-year low in the two trading sessions following the change, kicking off a regional currency selloff and prompting Vietnam into devaluing the dong and Kazakhstan switching to a free-float for the tenge. But even it did, he said the authority wouldn’t feel “awkward” as regulators world-wide have their own monetary policies to intervene in foreign-exchange markets.

Ngan Kim Man, deputy head of treasury at China Everbright Bank Co.’s Hong Kong branch. Hong Kong markets will also be closed Thursday and trading activities here tend to be quiet during China’s holiday.