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Foreign Exchange

Standard Chartered launches RMB globalization index

Standard Chartered has launched a renminbi globalization index (RGI) that will track the evolution of China’s currency as it moves inexorably toward becoming a new reserve currency, acting as a useful reference tool for clients as they integrate the currency into their hedging policies.

The index will use December 2010 as its base because Standard Chartered says that was the first point from which meaningful information on international growth in the currency emerged. It will measure the overall growth in offshore renminbi (CNH), usage, using four market components whose weights are inversely proportional to their variance. These include CNH deposits, trade settlement and other international payments, dim sum bonds and certificates of deposits issued, and FX turnover, calculated on a monthly basis. The index will initially cover location-specific data from Hong Kong, Singapore and London, while other centres will be added when they become more significant, says Standard Chartered.

“This index will provide a critical view of the [RMB’s] acceptance and offer clients various factors to consider while managing the RMB within their basket of working capital currencies,” says Karen Fawcett, Standard Chartered’s group head of transaction banking.

 The RGI: growth of RMB globalization since December 2010

 
 Source: Standard Chartered

The RGI is set to include data from globalized trade in the currency from Taiwan, after the country creates a CNY clearing bank, which Standard Chartered says could happen before the end of this year and before Singapore launches a CNY clearing bank.

Taiwan could then be included in Standard Chartered’s RGI before the end of the first half of 2013, the bank says.

Offshore RMB corporate survey

The RGI will complement a new survey of Standard Chartered corporate clients that conduct offshore RMB business.

The survey is independently assembled for the bank by The Asset magazine’s Asset Benchmark Research service, a specialist provider of Asian financial markets business intelligence.

The first results of the survey – which was conducted between mid-October and early November – examined the views of multinational corporates and other companies that likely deal in offshore RMB through business ventures in Hong Kong, around Asia and in London.

The survey found that, since a pause in the international growth of RMB usage in Q4 2011 through to the end of Q1 2012 – due to setbacks in the CNH market from the global financial crisis – only RMB deposits in Hong Kong (CNH) have failed to return to pre-crisis liquidity levels.

Otherwise, the RGI shows that RMB international usage now stands at a reading of 735, which is seven times larger than where the level of international usage was in December 2010.

“Our view is that the RMB … is becoming a major international currency that will play a substantial role in international trade and in central bank reserves,” says Marios Maratheftis, Standard Chartered’s global head of macro research.

The next survey will be conducted by Asset Benchmark Research in February.

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