Yuan trading hours extension impact on CNH

14 October, AtoZForex.com, Amsterdam  According to Reuters, sources with knowledge and close to the matter has indicated that anytime soon the foreign exchange market of China will extend its trading hours for Yuan.

Currently, the China Foreign Exchange Trade System closes at 16:30 local time. Now it’s expected that the trading hours will be shifted to 23:30 local time. One of the underlying reasons for such an adjustment is to have overlap with the European trading hours.

More in line with international markets

At the moment the China onshore market is out of sync with the London market. Marking it a large centre for the offshore CNH, which provides opportunity for international markets to trade the news and developments after the closure of the domestic markets.

Hence, a senior trader at a commercial bank in Shanghai clarifies that: “The change will make the Yuan move more in line with international markets, in particular European markets, and will make it more convenient to absorb international reactions.”

Yuan surpassed Yen as most currencies

Another reason for the change deals with the assumption that Beijing decided to encourage the international use of the Yuan. Especially, after the recent news of the Yuan surpassing the Yen as the fourth most used currency for global payments.

To be included in IMF’s SDR basket?

Furthermore, the extension of Yuan trading hours will support the attempt of China to include the Yuan in the currency basket of the IMF. According to HSBC’s Asia FX Strategist, Joey Chew the adjustment will be very positive for China:

“The move will be a big boost to the yuan’s inclusion in the IMF’s SDR basket. The IMF has mentioned that it had concerns on yuan liquidity during London trading hours because it calculates the FX value of SDR basket currencies at 12pm London time when there is no trading in China’s onshore market at present.”

What will happen with CNH?

Now the question resides: How will the Yuan trading hours extension impact on CNH? Is there going to be an immediate negative impact on the offshore market? According Ian Gunner, Altana currency fund manager in London:

“It may raise question marks about CNH going forward…and it may mean that over time there’ll be less need for non-deliverable forwards, but we’re still a way from that because they’ve not fully opened the market.”

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