Dollar/yuan swap points jump on expectations of widening yield gap between China and U.S.
- One-year onshore dollar/yuan swap points rose to 860 points in afternoon trade, the highest since March 16.
- Some market participants believe the move could suggest less yuan liquidity will be offered to the financial system in the near term.
SHANGHAI: China's yuan forwards in both onshore and offshore markets jumped on Tuesday on loosening dollar liquidity and rising expectations of a widening yield gap between the world's two largest economies.
One-year onshore dollar/yuan swap points rose to 860 points in afternoon trade, the highest since March 16.
The same tenor traded offshore jumped to a high of 1,200 points, the highest level since October 2018.
Dollar liquidity loosened at the start of the month, traders said. Official data from China's foreign exchange trading platform showed interbank reference offered rate for overnight contract stood at 0.07% on Tuesday.
Expectations for a widening yield gap between China and the United States following the People's Bank of China's (PBOC) plan to buy back loans to spur lending to smaller businesses also pushed swap points higher.
Some market participants believe the move could suggest less yuan liquidity will be offered to the financial system in the near term.
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