China launches CNY/THB on CFETS

Moving interbank trading in the pair to onshore markets aims to support initiatives such as Belt and Road

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Thai Baht: PBoC approves direct trading in CNY/THB on CFETS interbank markets

The People’s Bank of China has authorised the launch of direct trading in CNY/THB on the China Foreign Exchange Trade System, which will be responsible for the operation of and technological support for the cross.

The move is aimed at promoting bilateral trade and investment between China and Thailand, and to “actively co-operate with the Belt and Road Initiative”, says CFETS’s press release. “There are no trading commission fees on CNY/THB direct trading until July 31, 2020.”

Products will include spot, forwards and swaps, and trading will take place on a bilateral basis. Any institution holding an interbank RMB/FX market membership will be eligible for trading the CNY/THB cross in the interbank market.

CFETS has also introduced a market-making system for CNY/THB, with market-makers obliged to undertake obligations that include the continuous provision of two-way prices in the cross. CFETS will now publish a central parity rate for the renminbi’s exchange rate against the baht at 9:15am daily.

The parity rate will be determined by CFETS enquiring about prices from the CNY/THB market-makers direct trading before the foreign exchange market opens on each trading day. It averages out quoted prices with the exception of the highest and lowest, which are removed from the sample.

Prices in the renminbi will be allowed to fluctuate by 10% either side of the central parity rate on any trading day, but spreads quoted by banks will be allowed to be determined by individual institutions.

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