Photo: VCG
China’s central bank said Tuesday it will issue bills in Hong Kong, though it did not release details of the amount it will sell.
By absorbing yuan funds in the offshore market, the issuance of central bank bills can reduce the amount of yuan commercial banks have available to lend. The move could help push up the cost of yuan shorting.
As the domestic economy cools and trade tensions persist, financial markets are wondering whether the onshore yuan’s reference rate will weaken past 7 per U.S. dollar – a figure widely interpreted as a breaching point for further devaluation. The onshore yuan depreciated beyond 6.9 per dollar in mid-May due to intensified trade tensions, and is now fluctuating around 6.9.
In November, the central bank sold 20 billion yuan ($2.9 billion) worth of bills in Hong Kong — its first debt issuance in the city.
Related: Exclusive: The Number Seven Doesn’t Mean Much for Yuan, Ex-Central Bank Chief Says
Contact reporter Zhao Runhua (runhuazhao@caixin.com)
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