On July 2, China’s State Administration of Foreign Exchange (SAFE) announced that they would allow Chinese banks to set their USD/RMB exchange rates when dealing with clients, so removing the bid/offer regulatory controls for the currency pair. 

SAFE intends to make it easier for its domestic banks to to offer FX products such as options, forwards and swaps to local corporates. At the same time it plans to increase supervision of the market to ensure banks take risk appropriately.

Widened RMB margin and trading

As part of their internationalisation of the RMB, PBoC also announced the widening of the RMB’s daily permitted trading band from 2% to 3%. This again surprised the market, as it did on March 17 when it widened the margin from 1% to 2%.

At the moment, offshore CNH is mainly traded through Hong Kong and Singapore, and later this year it will be traded in UK, France and Germany.