The Forex industry contains many lucrative pairings, with USD/CNY being the most symbolic as it signifies certain aspects of the US-China trade relationship.
The exchange rate between both currencies is volatile due to socio-economic and country-specific conditions, which makes it attractive for traders. To provide a glimpse into the conditions of both countries, refer to the following summary:
China has placed a focus on the property sector and provides relending facility to support sectors including transport, logistics, and tech innovation that were hard hit by the COVID-19 pandemic. At the same time, the Chinese yuan fell, plagued by the pandemic.
From the USA, the sequence of FED rate hikes and inflation has caused volatility, while the weakness in the U.S dollar kept most other Asian currencies on track with weekly gains.
Given the circumstances of both countries, tracking the factors and fundamentals of this forex pair between USD and Yuan can be complex. Hence, this article will cover some of the main factors affecting the currencies as well as the contract specifications.
List of available exchanges for USD/CNH Futures
Currently, Orient Futures Singapore provides access to four exchanges that offer USD/CNH pairings, which are APEX, CME, HKEX, and SGX-DT, the details regarding the futures are as stated in the following infographic:
Orient Futures Singapore is an exchange clearing member of SGX (SGX-DT), SGX (SGX DC), and APEX, which connects clients directly to the exchange and to trade efficiently without additional operational risks.
SGX USD/CNH Futures
The SGX USD/CNH FX Futures (Full-Sized) have the following specifications:
The SGX USD/CNH Futures has a trading unit of 500,000 Chinese yuan, with a minimum fluctuation of one ten-thousandths of a United States dollar per 10 Chinese yuan, equivalent to five United States dollars per Contract.
Contract months are on all months.
Trading Hours for SGX are at these trading hours:
09:00 am – 12:00 pm and 01:00 pm – 05:00 pm
Mid-Day Break
– Pre-open 12:00 pm – 12:58 am/1259*pm and 05:00 pm – 05:04pm/05:05pm*
SGX USD/CNH Futures product symbol:
UC
The last trading day is two business days prior to 3rd Wednesday of the contract month.
APEX USD/CNH Futures
The APEX USD/CNH Futures have the following specifications:
The APEX USD/CNH Futures has a contract size of USD $10,000 with a tick value of 1.
Trading Sessions are on all Singapore Business Days from Monday-Friday, Excluding Singapore public holidays.
Trading Hours for APEX are at:
08:55 am – 08:50 am (Pre-Opening Session)
08:59 am – 00:00 am (Opening match session of Day Session)
09:00 am – 18:00 pm (Day Session)
APEX USD/CNH Futures product symbol:
UC
The Last Trading Day of a Contract shall be the Monday of that Contract Week if it is both a Hong Kong Business Day and a Singapore Business Day, otherwise the earliest subsequent day which is both a Hong Kong Business Day and a Singapore Business Day. Notwithstanding the above, the Exchange reserves the right to determine the Last Trading Day with notice.
RMB/Yuan/CNH and CNY
To begin, most currency pairings between the US and China are in CNH. However, CNH is often named in all its different names as CNY, yuan, and renminbi.
To clarify, the Renminbi (RMB) is an umbrella term for China’s currency. While Renminbi is the general term, the unit of the currency is Yuan and is categorized into CNY and CNH.
CNY is RMB currency that’s traded in mainland China, while CNH is RMB currency that is traded offshore from mainland China, such as in Singapore. It is important to distinguish CNY and CNH as CNH (the currency that is offered), is subjected to exchange rate differences and free market forces, unlike its local counterpart.
China’s Market Conditions
In relation to the economic conditions of China, Orient Futures Research has noted that there are some positive factors in the market. Last week (in November 2022), the chairman of the China Securities Regulatory Commission, Yi Huiman mentioned the establishment of a valuation system with Chinese characteristics. Subsequently, the Insurance Regulatory Commission also issued policies to bail out the real estate industry. In effect, some low-valued central state-owned enterprises have been boosted.
Nonetheless, the COVID-19 pandemic has remained problematic for the region, which has seen nearly 40,000 new additions in a single day.
With stricter regulations imposed to manage the pandemic, there is a high possibility of short-term fluctuations or small retracements. In the long term, the possibility of a rebound will depend on the effectiveness of the policy and the speed of recovery of the fundamentals.
Based on the China Development Institute, consumption rose 3.9%y/y in November, down 1 pps from October, and its adjusted growth rate was 0.5% y/y, hitting its lowest level this year. But trade is still strong.
The Yuan has risen 2.6% against the dollar this year, even though the dollar has been strengthening 8% since May.
In SGX’s Asia Currencies Insights, it is stated that “markets have reacted strongly to the lower-than-expected US CPI print and signs of reopening in China. A surge in equity inflows saw a sharp recovery in Asia FX late last week. News of China’s property market support has sustained the rally.”
Additionally, SGX also mentions that “we switch from a long to short December SGX USD/CNH contract (XUCZ2, Dec 22)” citing the property support measures and policy changes as a key factor of the rally.
USA’S market conditions
While China’s policies have mainly affected the domestic market, Fed’s tightening had spurred a rally in the dollar against other currencies. The Renminbi slumped around 4% in September, a record low against the dollar offshore.
From Mondevisione, it is reported that sustained US dollar strength drove hedging on SGX FX, Asia’s most comprehensive currencies marketplace.
On the other hand, capital.com states that Chris Turner at ING Group’s analytics arm THINK saw a few factors that may lead to a stronger-than-expected US dollar performance. He cites how aggressive the FED will be, Ukraine, Europe and energy, China and the overall risk environment as key factors for the outlook of US currency in 2023.
Start Trading with Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
