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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Exporter Preference for FX Swaps Fulfils Both Commercial, FX Management Needs
- Several reports on CNY FX intervention remain a focus for Chinese markets, with Reuters reporting that Chinese exporters are using currency swap deals to hold USD, while state-owned banks are selling USD in spot markets to support the currency.
The structure and use of these FX swaps is fulfilling several requirements:
- Exporters' preference to hold USD exposure given the appreciation in USD/CNY
- Exporters' need to pay local suppliers, settle tax bills in CNY
- Provision of USD to state-owned banks, which can sell in spot markets to pressure USD/CNY
The FX swaps structure allows exporters to place FX earnings (namely USD) with state banks and swap for CNY - with a fixed term, allowing them to conduct business in local currency, then swap back to USD at a later date and earn carry in the process. This is further incentivized by lower returns in USD deposit accounts, for which rates have been cut in recent months.
Regulators allow the swap contracts as they provide banks with USD, with which they can in turn sell in the spot market and stem CNY weakness
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Why MNI
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