The Standard HK / Friday, July 02, 2010
A local bank manager is not surprised that yuan stocks have ran out as supply is tight.
"People are banking on reports that the United States is pressing for a 10 percent yuan appreciation, despite Beijing saying any appreciation will be gradual," he told The Standard on condition of anonymity. "People want to make a fast buck since interest in the Hong Kong dollar is low. So the yuan is a sure bet for anybody."
A source at the Hong Kong Monetary Authority said the shortage at money changing counters could be due to another factor - hoarding.
"Money changers are expecting the yuan to appreciate faster and sooner, and so they are holding on to their stocks," the source said.
"The fact that there is no cap on conversions to yuan has put them a difficult position in both quoting and selling of the currency.
"They obviously do not want to sell large amounts of yuan."
Local banks have confirmed they have an unlimited supply of yuan, which they get directly from the mainland central bank, the People's Bank of China.
Yesterday's exchange rate was 864 yuan for HK$1,000 - two dollars lower than on Tuesday, when speculation on possible appreciation was at its highest.
But people are continuing to snap up the yuan, a supervisor at the Hui's Brothers foreign exchange company in Wan Chai said.
The supply from the mainland, Shenzhen in particular, has been low since the opening of the G20 summit last week, he added.
A money-changing agent in Shenzhen confirmed supply to Hong Kong is running low as most people hold on to the yuan thinking it will appreciate further.
On Lockhart Road, money changers at Hang Fung Foreign Remittance asked a reporter from The Standard to return today when asked to sell 10,000 yuan.
Another money changer near the Wan Chai MTR station said it had run out of yuan for the day. "The stronger the currency, the keener the demand," he added.
On June 19, just ahead of the G20 summit in Toronto, Canada, the People's Bank of China announced it will further reform the yuan exchange rate regime to make it more flexible.
The decision has been welcomed by many nations and organizations, including the International Monetary Fund.
Zhang Tao, international department director with the People's Bank, said the reform of the yuan exchange rate regime will help restructure the nation's economy and promote all- around sustainable and balanced growth.
"In doing so, we can guide resources to the services sector and boost our internal demand, to promote industrial upgrading and the transformation of the economic growth pattern," Zhang said.
The stability of the yuan exchange rate played a significant role in mitigating the impact of the 2008 financial crisis on the mainland as other currencies, including the US dollar, depreciated.
A senior official of the People's Bank said further yuan exchange rate reform can help Beijing work closely with its partners in the long term for mutual benefit and further development.