Taiwan Starts Yuan Fixings for Spot and Interbank Rates Today

Taiwan has started compiling daily fixings for the offshore yuan’s spot and interbank interest rates as it seeks to boost lending in the Chinese currency and differentiate its market from Hong Kong’s.

The Taipei Foreign Exchange Market Foundation began releasing the reference rates at 11:15 a.m. local time today based on contributions from 15 lenders including Bank of China’s Taipei branch, CTBC Bank Co. and Bank of Taiwan. The spot fixing was 6.1473 per dollar, while the fixing for the one-month interbank interest rate was 3.0377 percent.

Since an agreement with China paved the way for Taiwanese banks to start taking yuan deposits in February 2013, the island has accumulated 293 billion yuan ($48 billion) of savings in the currency. Taiwanese lenders’ uses of the currency remain limited, with about half re-deposited at the clearing bank and only 7 percent used for loans, Credit Suisse Group AG estimated in May.

“It’s definitely positive and will help develop the domestic market,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “You need to have fixings in order to have confidence and hedging instruments,” such as forward contracts, he said.

The fixing could provide a reference for pricing yuan products such as loans and derivatives, Song Chiu-lai, an adviser to the island’s central bank, said in November. The rates would also differentiate Taiwan’s market from Hong Kong’s and measure funding demand, Song said.

Hong Kong’s one-month yuan interbank offered rate, known as the yuan Hibor, was 2.99889 percent today. The offshore yuan traded in the city strengthened 0.06 percent to 6.1460 per dollar as of 12:52 p.m. local time.