The Central Bank Of China Has Launched A Heavy Attack On Cross-Border Arbitrage Of RMB.

The central bank recently instructed some domestic banks to provide cross-border financing for offshore renminbi bank accounts, and demanded suspension of eligible offshore RMB clearing banks and participation in bank bond repo pactions.

Another insider said the central bank did not restrict cross-border financing of the Renminbi with real trade background in window guidance.

The central bank has not replied to the fax that Bloomberg is seeking to comment on.

Citing three people familiar with the matter, China's central bank has asked the offshore RMB clearing bank to suspend.

RMB account financing and bond repurchase pactions have been "suspended".

The short-term liquidity of the offshore renminbi market tightened on Wednesday, and Hongkong borrows loans.

The cost is rising.

HIBOR interest rate rose 11 basis points to 4.899% on Wednesday, the highest since November 4th.

Meanwhile, the offshore RMB forward price curve has moved up and steeply.

This morning Bloomberg data showed that the difference between the 1 month and the 12 month US dollar / offshore renminbi forward price expanded to 1605 points, the highest level since October 5th.

At 12:12 in Beijing time, the offshore renminbi rose 0.1% to 6.3785 against the US dollar, the biggest increase this month.

Offshore renminbi rose 0.13% to 6.4061 against the US dollar.

"The central bank's move may want to limit the financing of these institutions in the domestic interbank market so as not to turn them out as a source of funds for shorting the renminbi so as to stabilize the offshore renminbi exchange rate," said Huachang securities in a report on Thursday.

In June of this year,

RMB clearing banks and participating banks are allowed to carry out bond repurchase pactions in the interbank market in China, and the repurchase funds can be pferred overseas.

As early as 2013, the central bank began to allow domestic agent banks to extend the term of RMB account financing to overseas banks for one year, and the account financing ratio should not exceed 3% of the year-end balance of the deposits of the domestic agent banks.

Since the reform of the central parity pricing mechanism in August 11th, the pressure of devaluation pressure and the fluctuation of exchange rate both exceeded the market expectations.

The Chinese government subsequently issued a series of policies on the exchange rate policy, including the sale of foreign exchange, options and other businesses into the payment of foreign exchange reserves.

The Bank of Malaya points out that there are reports that the Central Bank of China has suspended some mainland agents to cross border financing for offshore banks. This may be a step towards easing the depreciation of offshore renminbi.

Fiona Lim, a senior foreign exchange analyst in Singapore, said these obvious measures show that the Central Bank of China hopes to ease the pressure on offshore RMB depreciation before the offshore renminbi has lost a large portion since the beginning of November, especially before the Fed's interest rate rises.

Offshore renminbi against the US dollar has fallen 1.35% this month, down by 0.95% of the onshore Renminbi.

Since this month, under the influence of China's continued economic downturn and the expectation that the Federal Reserve will begin to raise interest rates in December, the Yuan's expectation of depreciation has begun to heat up, and the offshore and offshore exchange rates have continued to weaken, and the exchange rate difference between RMB and foreign exchange has widened again and again, making room for cross-border arbitrage.

Since this week, the Central Bank of China has been showing signs of intervention, and the reappearance of Chinese capital in the offshore RMB market is concentrated on the sale of the dollar.

In order to join the IMF basket of special drawing rights, the central bank has adopted a series of measures including expanding foreign capital access to China's financial market.

However, another result of implementing these policies is to bring more Renminbi positions and opportunities to cross-border arbitrage.