International Monetary Fund Asia head says yuan’s adoption could intensify China spillovers

The weakening of the fixing “probably influenced expectations that maybe the onshore yuan will weaken in the coming sessions”, said Christy Tan, head of markets strategy at National Australia Bank Ltd.in Hong Kong.

“The spread between the onshore and offshore yuan is expected to be between 200 and 500 pips in the near future”, said an offshore trader at an Asian bank in Hong Kong. The two rates nearly converged two weeks ago. The offshore yuan was trading 0.68 percent, or 433 pips, weaker than the onshore spot at 6.4012 per dollar by midday. Investors were confident that the central bank was actively pursuing measures to stimulate growth. They did not see speculative flows.

In September alone, new loans rose 144 billion yuan to 1.05 trillion yuan. The HKMA will release the September figure on Friday.

China’s yuan firmed against the USA currency on Tuesday, underpinned by suspected dollar sales by state banks on behalf of the central bank.

Taiwan’s central bank said on Monday it will allow local banks to clear Chinese yuan positions with the Bank of China’s Taipei branch for a broader range of the island’s businesses, starting in early November. The currency had a market share of 2.45 percent, lagging the Japanese yen’s 2.88 percent.

According to the report, the move is significant as the global Monetary Fund meeting is set to make its final decision on whether to include the renminbi in the basket of currencies that make up its special drawing rights (SDR), a major goal in making the yuan an worldwide currency. The People’s Bank of China is looking to align the two rates as it seeks to meet the worldwide Monetary Fund’s requirements for adding the yuan into its global reserves basket.