Offshore yuan strengthens, premium over onshore yuan at 19-month high

Hong Kong in August shrank for the first time in five months after China’s surprise devaluation triggered a move out of assets denominated in the currency.

“The yuan is becoming less and less likely to be included in SDRs this year”, said Lian Ping, chief economist at Bank of Communications in Shanghai.

In China’s spot foreign exchange market, the yuan is allowed to rise or fall by two percent from the central parity rate each trading day, Xinhua reported. The professional ordered yuan in both Shanghai and Hong Kong via brokers of status money lenders on Friday, as per a couple accustomed to the… The International Monetary Fund in a July report expressed concern about disparities between China’s onshore and offshore exchange rates, saying it could lead to valuation difficulties, and the gap has widened since the devaluation.

Converging lending rates and a less predictable yuan currency regime has dampened enthusiasm for new Chinese offshore bond issuance, giving a newly accommodative mainland onshore market the chance to grab more deals in the fourth quarter.

Ltd said on Tuesday it has issued 1 billion yuan ($157.17 million) of 3-year panda bonds with a coupon of 3.5 percent. Yuan savings in Hong Kong probably shrank in August, according to the city’s association of banks.

The bank made the announcement in an emailed statement.

“It’s very positive progress for China to see the U.S. take a step toward supporting its reserve currency push”, said Tommy Xie, an economist at Oversea-Chinese Banking Corp.in Singapore. 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 medium-term plan is to let the currency be more flexible”.