No 677 - A change is going to come

　　原创

　　BANDSFinancial

　　磐石金融有限公司（ BANDS Financial Limited ）在香港注册成立，是一家持有香港证监会（SFC）2号牌照的期货经纪公司，业务涉及中国以外全球大部分活跃期货及期权市场。

　　It‘s a long time since we looked at FX rates but the recent State Council’s missive on containing commodity price inflation puts the comparative rate of the RMB into sharp focus. A year ago the RMB against the USD was trading at 7.14 compared to the 6.43 this morning, the RMB has strengthened almost exactly 10%.Similarly, the dollar index is trading around 89.75 this morning also down around 10% year on year. Curiously in the looking glass world of interest rates, the 10-year rate fell 6 bps yesterday to 1.634% despite the somewhat hawkish FOMC minutes, which showed that some policymakers are already comfortable in discussing a monetary tapering plan if the US economy continues to pick up strongly and inflationary pressures persist.As a panellist at this weeks FOW European Derivatives conference, I was asked a question along the lines of “does the growth of international access to RMB quoted Crude Oil, Iron Ore and Bonded Copper futures present a threat to the USD？” Well, no, was my answer, we are far too early in the development of these markets and the process of opening up access to the RMB to be considered a threat. But I then qualified my answer by saying users of these commodities should future proof their systems as the physical markets in Asia will become benchmarked to the Chinese price in RMB.However, that is not all the story. As an HK based futures broker, three years ago all our client assets would have been in USD. But following the opening of the Chinese INE Crude Oil and DCE Iron Ore futures markets in 2018 our client base has grasped the opportunity and here at BANDS some 80% of our client base currently execute cross border arbitrage. To facilitate their exposures clients now hold comparable volumes of RMB balances in addition to USD balances to facilitate their trading. Currency FX risks are hedged on the SGX CNH future, and as an Overseas Intermediary BANDS can move USD and RMB required for trading in and out of China in under 2 hours.Ours is ultimately a small story, But if replicated at other Overseas Intermediaries and the other means of access into China, Bond Connect, Stock Connect, the QFFI schemes, then, in answer to the question posed at the FOW, I should have added, the regional substitution of the USD for the RMB has begun. Have a good weekend

　　Joh