Yuan in Hong Kong Snaps Two-Week Drop on Stock Link, Bond Sale

Yuan in Hong Kong Snaps Two-Week Drop on Stock Link, Bond Sale

By Fion Li Nov 14, 2014 1:21 AM PT

 

 

The yuan in Hong Kong snapped two weeks of decline as investors prepared for the start of an equities link with Shanghai that will allow 23.5 billion yuan ($3.8 billion) of daily cross-border transactions.

 

The Stock Connect will start on Nov. 17, the same day that Hong Kong is due to scrap a 20,000 yuan per day conversion cap for permanent residents. The Ministry of Finance will sell 12 billion yuan of bonds in the city next week. The People’s Bank of China raised the currency’s reference rate by a total of 0.33 percent from Nov. 7, the most since the five days ended Sept. 12, to 6.1399 per dollar.

 

“The stock connect creates more demand for the currency,” said Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole CIB. “While the conversion cap removal means more supply, on balance, the overall development has been positive for the offshore yuan. Investors are also accumulating some yuan for next week’s bond sale.”

 

The offshore currency climbed 0.07 percent to 6.1317 per dollar as of 5:14 p.m. in Hong Kong, according to data compiled by Bloomberg. It was little changed today. In Shanghai, the yuan fell 0.1 percent today and this week to 6.1307, China Foreign Exchange Trade System prices show. The onshore spot rate traded 0.2 percent stronger than the fixing, within the 2 percent limit. Continue Reading.