On Nov
28th, China Foreign Exchange Trade System (CFETS) issued a statement
saying that it will now allow interbank trading of AUD and CAD against CNY,
joining the ranks of USD, JPY, EUR, GBP, MYR, RUB, and HKD.
This is
a good sign but China must move a bit faster than this if they ever want to be
taken seriously as a candidate for an international trade currency
(if that is even possible).
Notwithstanding
the opaqueness of China’s banking and political system. At this point, options
on CNY currency pairs can only be brought but not sold, so even simple strategies
such as a synthetic forward or a risk reversal are still not possible. With these strict restrictions, interbank
trade volume is still minimal. Banks would much rather focus their business that
has more flexibility and can actually attract some interests.
Dipping
your foot into the pool is fine, but no one will ever learn how to swim until he gets his head under
the water.
CFETS
should take a little bit of a risk and actually let the market start providing
some better liquidity and transparency.
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