The introduction of the offshore Renminbi (CNH) was a major step towards the internationalization of the Chinese currency, and put it on track to become one of the world’s reserve currencies. There has been strong and consistent growth in the CNH market throughout the internationalization process. HKEX launched the USD/CNH futures in September 2012, the world’s first deliverable RMB currency futures product to be quoted, margined, and settled in RMB, to provide greater capital efficiency and flexibility for managing exposure to the expanding offshore RMB market.
Contributing factors:
1. Balance of payments and foreign exchange reserves
2. Inflation
3. Interest rate policy
4. Capital flow in the capital market
5. Political situation
6. Import and Export value
7. Trade freedom
8. Productivity and consumption
9. Economic growth
Advantages:
1. Best liquidity and market depth in periods of volatility
2. Leverage effect of futures margining
3. Hedging and risk management opportunities
4. Block trades offer OTC flexibility with minimal counterparty risk
5. Ten contract months with tenors up to 22 months
6. Physical delivery to support investors using RMB for transactions
7. Long trading hours to cover some European and US business hours
8. Flexible collateral policy on RMB margin requirement
