Forex Flash: Offshore CNH rates and the impact of RQFII - ANZ

FXstreet.com (Barcelona) - Wei Liang Chang, FX Strategist at ANZ notes that the divergence between the RMY offshore and onshore interest rates has widened due to increased appreciation expectations and speculation of band widening.

Chang feels that such divergence is likely to persist in the near-term, until such time as appreciation expectations ease, or further substantial progress is made in opening up China’s portfolio account. He writes, “We see the potential for an expanded RQFII scheme to lead to some narrowing in the divergence between onshore and offshore interest rates, but full convergence will only occur once China fully opens up the capital account.”