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More relaxation of cash management regulation in Asia-Pacific while RMB growth continues

Removing restrictions of efficient cash management is happening across Asia-Pacific. While the march of the RMB continues, according to Standard Chartered’s Renminbi Globalisation Index

China plans new FTZ

China is planning to set up a Beijing-Tianjing-Hebei free-trade zone (FTZ) to coordinate development of the free trade in the three cities, according to the China Securities Journal. Apparently, one of the free trade zones could be located in Hebei's Jingtang port and Caofeidian. The plans have already been submitted the regulators for approval.

RBI relaxes rules for smaller currency hedges

To help small and medium enterprises to manage their exposures more effectively; the Reserve Bank of India (RBI) has relaxed documentation requirements for small hedges of all resident individuals, firms and companies with actual or anticipated foreign exchange exposures. The limit for FX hedges not requiring production of the underlying documents has been increased to $250k (from $100k limit set in 2007).

March of the RMB Globalisation Index

The Standard Chartered’s RGI, rose to a new high of 1,586 in February, up 6.8% from the previous month and 86.5% year-on-year. The increase was led by rising offshore deposits and cross-border Renminbi payments. Despite the recent shake-out of one-sided Renminbi appreciation expectations could weigh on near-term market sentiment, Standard Chartered believe that any RGI slowdown in the coming months to be marginal.

Preliminary numbers show that CNH FX turnover rose across all major offshore centres in March. In particular, increased FX variability has fuelled more two-way interest from institutional investors. Less one-sided Renminbi appreciation expectations and the recent widening of the CNY trading band should also start to boost hedging activity among corporates in the medium term.

The recent build up of Renminbi liquidity pool in Taiwan has been rapid. The size of Renminbi deposit in Taiwan has risen significantly to 24% of total foreign-currency deposit in February, up from just 4% a year ago. However, there are some near-term concerns. The approval of CNY 100bn R-QFII quota from mainland China may depend on the outcome of the cross-straits Trade Service Pact. Taiwan Central Bank is also in talks to sign a currency swap agreement with the People’s Bank of China. Both are considered crucial next steps in terms of helping Taiwan to develop its offshore Renminbi market.

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