This page has been archived and commenting is disabled.

Another Nail In The Dollar's Coffin: CME Launching Renminbi Futures On August 22

Tyler Durden's picture




 

Remember when the dollar reigned supreme, and nobody cared about that joke of a currency, the Chinese Renminbi? Neither do we. And neither does the CME, which just announced it is launching USD/CNY futures, which will be available in standard and E-micro sizes beginning August 22. Put otherwise, with one fell swoop the CME will now allow one to transform liability risk, credit and maturity of underlying assets from one currency to another, while on margin (granted, exposed to the same margin shenanigans that make silver bulls scream blood murder every time the CME's name is mentioned). And the CME is just the beginning of what soon will allow everyone to denominate their liability exposure into the Chinese currency. In the process, the dollar lost yet another battle, as it continues to lose the war.

From the CME:

The Chinese renminbi – or RMB – has experienced rapid growth in deposit and trading volume both on- and off-shore. The renminbi is now being used for business transactions in multiple off-shore locations which include Hong Kong, Singapore, Korea, Australia and other areas around the world. Accordingly, a need for capital risk management tools for the Chinese currency has emerged.

To address this need, CME Group has developed USD/RMB futures. These contracts will be offered in standard and E-micro sizes and will be quoted in conventional interbank FX market terms.

    Standard contracts: Based on USD 100,000
    E-micro contracts: 1/10 the standard contract size, based on USD 10,000

Key features:

  •     Cash-settled to the spot value of the interbank convention, RMB per USD, as published by the People's Bank of China (PBC)
  •     Daily pays and collects calculated in RMB, then translated into USDs
  •     Renminbi rate is displayed on Reuters SAEC page
  •     Available alongside the CME's existing RMB/USD contract quoted in the American convention

Full contract details:

Contract Specifications: Standard and E-micro USD/RMB Futures**
Contract Size Standard Futures based on 100,000 USD (≈ RMB 648,300);
E-micro Futures

based on 10,000 USD (≈ RMB 64,830)
Tick Size Standard Contract:
Outrights quoted in 0.0010 RMB per USD = 100 RMB (≈ USD $15.42) per
contract; calendar spreads quoted in 0.0005 RMB per USD = 50 RMB (≈ USD
$7.71) per contract
E-micro Contract: Outrights quoted in 0.0010 RMB per USD = 10 RMB (≈ USD $1.54) per contract
RMB-Denominated Daily pays and collects calculated in RMB but translated into USD by reference to daily PBC fixing rate, and banked in USD
CME Globex Trading Hours Sundays through Fridays:
5:00 p.m.-4:00 p.m. (Central Time, CT) the next day. On Friday CME
Globex platform closes at 4:00 p.m. and reopens Sunday at 5:00 p.m.
CME ClearPort Trading Hours Sundays through Fridays:
6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a
45–minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)
Months Standard: 13 consecutive
calendar months (Jan, Feb, Mar, Apr, May, Jun, Jul, Aug, Sep, Oct, Nov,
Dec) plus 8 March quarterly months (3-year maturity range)

E-micro:

12 consecutive calendar months (Jan, Feb, Mar, Apr, May, Jun, Jul, Aug, Sep, Oct, Nov, Dec)

Last Trading Day Trading ceases at 9:00 am Beijing time on 1st Beijing business day immediately preceding 3rd Wednesday of contract month
NDF-Style Cash Settlement Final Settlement Price (FSP) at "Chinese
renminbi per U.S. dollar" fixing rate published by PBC at 9:15 am
Beijing time on Reuters SAEC page opposite "USDCNY="
Strike Prices NA
Exercise/Assignment NA
Position Limits / Position Accountability USD/RMB futures converted to notional
equivalents of 6,000 CME full-sized RMB/USD futures contracts (=6
billion RMB) for Position Accountability trigger level; and no more than
2,000 full-sized RMB/USD futures contracts (=2 billion RMB) for
Position Limit in the spot month on or after the day one week prior to
the termination of trading day.**

Positions for the same account holder will be aggregated
across standard-sized and E-micros futures with 10 E-micros equaling 1
standard-sized contract.


**For example, if the appropriate RMB per USD rate is 6.4830
RMB per USD ("prior day's Regular Trading Hours settlement") , then one
100,000 USD standard futures contract would count as 648,300 RMB
against the PA trigger level of 6 billion RMB. Similarly, one 10,000
USD E-micro futures contract would count as 64,830 RMB against the 2
billion RMB Spot Position Limit.

CME Globex Codes Standard: CNY
E-micro:

MCY
Block Trade Eligibility and Minimum Standard: Yes. Minimum Quantity: 50
E-micro:

Not eligible for block trades.
EFRP Eligibility Yes
Exchange Rule These contracts are listed with, and subject to, the rules and regulations of CME.
*Note that this process implies the
possibility that the cumulative USD denominated pays and collects may
not sum to zero even where trade is "scratched." I.e., a customer may
buy (sell) and subsequently sell (buy) a contract at the same price
quoted in terms of RMB per USD. However, contingent upon the path taken
by exchange rates while the trade is open, these USD denominated cash
flows, in total, may diverge somewhat from zero.

**Options on USD/RMB (CNY) futures contracts will be offered for trading at a later date.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 07/10/2011 - 22:52 | 1442516 SilverIsKing
SilverIsKing's picture

Yuan Bitchez!

Mon, 07/11/2011 - 00:07 | 1442563 66Sexy
66Sexy's picture

A bit dramatic, isn't it?

Tyler said it himself: The chinese economy cannot sustain itself without exporting to western corporations.

IMO the chinese cant afford their own produciton when compared to corporate american buying power like WallMart: They pay more than we do for their own production. Vegetables dishes are cheaper, though... and BBQ lamb. Everything is imported.. and costs more. Chinese consumers prefer foriegn goods anyway, and look down on domestic produced goods, like clothes.

Forget Chinese domestic consumption w/o credit expansion and wage growth. Chinese wage growth would create social unrest and kill american corporate outsourcing, thereby killing their exports. They dont have consumer credit cards either, just debit.. another example of China being a free'er society than the US.

Europeans don't buy chinese crap; they actually have some degree of taste, and are not totally exploited by outsourcing and credit expansionism. Yes, they are skinny, and ride trains to work... so what?

The Yuan is dead money; and probably just as vulnerable as the dollar... until the Chinese finally wise up and introduce a silver backed currency to rally 95% of the worlds production and consumer base... and absolutely betray the financial elite; who obviously have some agreement with the top tiers of Chinese government.

Mon, 07/11/2011 - 01:03 | 1442709 SilverIsKing
SilverIsKing's picture

I just like saying, "Yuan Bitchez."

Mon, 07/11/2011 - 02:22 | 1442815 Max Fischer
Max Fischer's picture

A bit dramatic, isn't it?

That's an understatement.  To imply that the USD is under threat from the CNY because the CME is going to start trading CNY futures is very misleading.  

Total trading in renminbi futures was ~20B per day in 2010. For a little perspective, there are ~$22T in gross notional Euro derivatives outstanding and ~$48T in gross notional USD derivatives outstanding. There's even ~240B in Danish Krone derivatives out there. 

If you're having cocktails at Dorsia on Friday night with Bateman, Halberstam, Allen and (dreadfully) Carruthers, and the conversation turns to growth in currency trading, make sure you mention the RUB and BRL, which are up 350% and 450% YoY respectively.

http://www.bis.org/statistics/otcder/dt20b20c.pdf

_ Max Fischer, Civis Mundi   

 

Mon, 07/11/2011 - 07:57 | 1443061 66Sexy
66Sexy's picture

With the occasional chime from Bateman: "I wonder what she'd look like without a head"

Mon, 07/11/2011 - 08:22 | 1443108 ratso
ratso's picture

Right you are Max. The problems in the Chinese economy will be showing up in force over the next 18 months.  Hard landing coming for the Chinese.

Mon, 07/11/2011 - 05:49 | 1442923 bigwavedave
bigwavedave's picture

to be settled in USD.... move on

Sun, 07/10/2011 - 22:55 | 1442518 Cognitive Dissonance
Cognitive Dissonance's picture

Are we (the USA) gonna make it until August 22?

In one piece that is.

Sun, 07/10/2011 - 23:01 | 1442527 Infinite QE
Infinite QE's picture

I'd be surprised if we get past July 22nd!

Mon, 07/11/2011 - 00:01 | 1442629 66Sexy
66Sexy's picture

the site is dragging ass tonight... i think its the citibank advertisment banner.

Mon, 07/11/2011 - 05:51 | 1442925 bigwavedave
bigwavedave's picture

im from 1966 and still sexy... and one of my best (dead) friends just loved that phrase... Draggin' Ass. Priceless

Mon, 07/11/2011 - 00:02 | 1442630 Vint Slugs
Vint Slugs's picture

Sure,  we will make it to Aug 22 and beyond.  The USA is a huge, and largely homogenous, socio-political construct.  The idea of its disintegrating in a short, finite timeframe is just not probable.  Look at Greece as an example:  as bad as the situation there has been during the past several months, the country stands.  Comparatively, the USA is a bastion of socio-political stability.  Everything's going to be just fine for now.  Maybe years down the road some other scenario will transpire.

Time to take a deep breath, read the kids a nice goodnight story,  then repair to the company of the faithful wife (and if you're lucky, dog).

Sun, 07/10/2011 - 23:07 | 1442535 Solid
Solid's picture

Round eye in big trouble.

Mon, 07/11/2011 - 06:54 | 1442970 j0nx
j0nx's picture

I got your round eye right here ---> (_o_)

Sun, 07/10/2011 - 23:10 | 1442539 HungrySeagull
HungrySeagull's picture

AWW SHITE!!!!!

Sun, 07/10/2011 - 23:11 | 1442540 HungrySeagull
HungrySeagull's picture

Paper is dead, All hail the HFT Silver.

Sun, 07/10/2011 - 23:16 | 1442544 caerus
caerus's picture

1.  Fly, Drive, Crawl to NYC branch of the BoC

2.  Open a checking account and convert as much $ as they will allow into renminbi

3.  Sit back and enjoy watching the (as Gibbon so eloquently put it) decline and fall of western civilization

sic sorry i meant the roman empire...he he

 

Mon, 07/11/2011 - 00:39 | 1442671 bakken
bakken's picture

Why would anyone exchange US fiat for an even more shaky fiat currency.  If you were serious you would be in PM.  The Chinese will be.

Sun, 07/10/2011 - 23:20 | 1442553 TruthInSunshine
TruthInSunshine's picture

I am no fan of our governmental policies or the even more absurd/criminal policies of the private Federal Reserve (if I had the legal and political power, I'd revoke its charter, and compel the DOJ to launch an aggressive criminal investigation into all Federal Reserve Bank members & activities), but I'll be the possibly LONE contrarian here who sees a big USD rally coming for a longer than thought previously possible/likely time frame.

With what's coming down the pike on the global scene, the ability to project military power, where the U.S. already has a massive advantage with bases in highly strategic locations, will prove far more potent and timely than many here believe.

I will go one step further and argue the Chinese economy will falter worse than that of the U.S., and that the Chinese currency will falter badly, over the next decade.

Relative to all currencies, gold will shine, if only by besting some real dogs, however.

Sun, 07/10/2011 - 23:21 | 1442561 HungrySeagull
HungrySeagull's picture

The real dogs you speak of are only now catching and ripping the junkyard midnight shoppers to peices halfway to the outer fence.

Sun, 07/10/2011 - 23:42 | 1442608 oldman
oldman's picture

Truth is.

That military option is all that is left.

Truth is.

This country knows no other way.

Truth is.

And they have fogotten how long it has been since the US of A won a war.

 Truth is.

not a thing to do                    

 

 

 

Mon, 07/11/2011 - 00:03 | 1442625 TruthInSunshine
TruthInSunshine's picture

Truth is that the military option has divined the economic order of the globe since man's earliest history.

It's an uncomfortable but undeniable truth.

I am no polly on the state of the U.S. Economy (nor the equally as bad or worse state of the Eurozone, Chinese or Japanese economies), but I am also of the belief that many adversaries or aspiring adversaries to U.S. Hegemony underestimate (rather than overestimate, as is oft stated in the case in the media) the truly horrific destructive and horrific weapons exclusively owned by the U.S. Government.

If shows of military force were a poker game, the U.S. has no discernable tell even as it holds a royal flush. The U.S. soft sells its true military capabilities.

I say this without emotional sentiment.

Mon, 07/11/2011 - 00:05 | 1442631 oldman
oldman's picture

Truth is.

This old man agrees with you and also, 'without emotional sentiment'.

Thanks for the post, Truth In Sunshine.

Mon, 07/11/2011 - 00:58 | 1442701 TruthInSunshine
TruthInSunshine's picture

Likewise, om.

It'd be nice to see military supremacy be used, long term, for righteous causes.

I'm not sure how often that's been the case over the course of human history, but sadly, I believe any such periods where it's been used so have been the exception, rather than the rule.

Forget righteous causes - I'd settle for ones that aren't tantamount to the intentional infliction of economic & human suffering.

Mon, 07/11/2011 - 01:23 | 1442753 HungrySeagull
HungrySeagull's picture

When 9-11 happened that week was reported that the Populations of Iran, Afghanistan, Iraq and Syria were all migrating any way they can to get the fuck out of Dodge.

Human suffering did continue as some gathered near the Turkish Border, the USSR Borders and so on.

We did not care because we were coming, someone is going to get hit and bringing Hell with us on the way.

The Civilians knew. So they choke the roads.

Mon, 07/11/2011 - 01:58 | 1442800 oldman
oldman's picture

Truth,

Remember when the dollar was worthless in 1980-1983 or so?

And everyone thought it was trickle down/ high interest rates that strengthened it.

I always had a third reason that it became strong again----the US military attacked that superpower known as Grenada during that time----flexed its military might and actually won a war(?).

I don't want to see this shit come down, so I hope my return to see the show is wasted money, but who can say a word about these things?

Life is too short for it not to be interesting

and this is VERY interesting, I must say.

Mon, 07/11/2011 - 02:11 | 1442809 Peter_Griffin
Peter_Griffin's picture

I was reading this last week that the US has developed a drone that can bomb anywhere in the world in four minutes, or some really small amount of time.  Same day, read the US government is trying to challenge that drone bombing is an act of policing rather than an act of war....  We have came to strange times that I do not like.

Mon, 07/11/2011 - 02:15 | 1442812 oldman
oldman's picture

PG,

There is nothing 'personal' for the universe---let go of prefernces and just hang out here with the rest of us do-nothingers, droning on and on and on

Let' s have some fun---the party's nearly over.

Mon, 07/11/2011 - 08:13 | 1443089 doggings
doggings's picture

I was reading this last week that the US has developed a drone that can bomb anywhere in the world in four minutes, or some really small amount of time.  Same day, read the US government is trying to challenge that drone bombing is an act of policing rather than an act of war....  We have came to strange times that I do not like.

this is only going to get worse, believe.

http://red-pill.org/2047-usa-air-force-drone-nightmare-vision-future-matrix-terminator/

Mon, 07/11/2011 - 05:56 | 1442929 bigwavedave
bigwavedave's picture

the fight went asymetric during vietnam. thats why the yanks lost. 

 

right now the export of inflation to china is an act of war by the FED and by design. weapons have changed. spending $1 million to kill an islamic 14 year old just wont work. get a grip and get with the program. 'the enemy of my creditor is my friend'

Mon, 07/11/2011 - 00:08 | 1442640 Raymond Reason
Raymond Reason's picture

Yeah they won't hesitate to bomb the world into oblivion.  When they can no longer prop up the dollar, these people....the Fed, the Treasury, the ESF, or whoever the hell is controlling everything will fear for their lives and will stop at nothing.  God help us. 

I hope they go quietly like Madoff, but doubt it.   They're the masters of the universe.    

Mon, 07/11/2011 - 00:51 | 1442691 bakken
bakken's picture

Long Term, Long USD. Yes.  China will not make it and really where will money go?  The Euro?

The point is:  China is really short water.  Really.  As the country experiences larger and more severe droughts, $2 trillion in the Bank won't be able to build enough infrastructure to save them.

Millions of people on the move in front of Northern droughts and desertification will cause upheaval in China worse than after WWII>>>>A Galactic Sized Mega Chinese Cluster-F*ck. 2018-2021?  It is hard to gloat over this since a huge number of people will die there.

#1 what?  A disaster that will make Africe look like Disneyland.

We may be broke in the USA, but in terms of water and space  we are fantastically wealthy.

Mon, 07/11/2011 - 01:12 | 1442711 TruthInSunshine
TruthInSunshine's picture

I don't know why anyone would junk you, even if they legitimately disagree with you, rather than provide a rebuttal to your statements.

China's monumentous obstacle is a global economy that can increase far more "stuff" with incredibly fewer people doing the work, and this is a trend that will only accelerate as technology accelerates - and that means big problems for China in terms of keeping a massive number of young people in gainful employment.

China's problem is demographically explosive, to say the least.

It took over a 100 man-hours of units of labor to produce a car in the early 1900s. It now takes as few as 12. Most of us will see that 12 halved in our lifetimes, and that's not considering the new, modular types of production now under development, which will come close to eliminating human inputs in the manufacturing and assembly process.

Mon, 07/11/2011 - 06:02 | 1442933 bigwavedave
bigwavedave's picture

the situation is thus. the yanks already have too much of everything they need. fat assed welfare mingers are the 'tell'. the chinese still have fuck all (as a group). the time for a full court press is now. that is the evil that is kissenger. we are on a full court press, playing defence yes. but playing for the low point scoring win. bust china and win the game. people say this is the chinese century. they are wrong. they will never get to buy the crap they make. 

Mon, 07/11/2011 - 09:01 | 1443240 qussl3
qussl3's picture

The Chinese will solve it....

By damming the source of the Mekong and Ganges.

Indochina and India are the ones that are fooked.

Mon, 07/11/2011 - 08:01 | 1443041 fiftybagger
fiftybagger's picture

"I will go one step further and argue the Chinese economy will falter worse than that of the U.S."

 

Yeah.  Remember 2008?  "Now that the U.S. is in recession, those Chinamen are going down for sure".  Right.  Even a stopped clock is right twice a day.  You clowns have been wrong twenty years running.

 

http://www.google.com/publicdata?ds=wb-wdi&met_y=ny_gdp_mktp_kd_zg&idim=...

http://www.tradingeconomics.com/charts/china-gdp-growth-rate.png

 

You may find it more profitable if you learned how to read a chart:

http://chart.finance.yahoo.com/5y?usdcny=x&lang=en-US&region=US

Sun, 07/10/2011 - 23:19 | 1442557 caerus
caerus's picture

Yes, you're making a wise call on the race to the bottom...euro prob first...but in the end its going to zero...

Sun, 07/10/2011 - 23:19 | 1442558 caerus
caerus's picture

its ALL going to zero...

Mon, 07/11/2011 - 06:16 | 1442945 bigwavedave
bigwavedave's picture

i dont think it will be the euro first. i think it will end with the big dollar rally. there are smart people at the top. they let the game go on this long. they are not going to lose it by making it easy. china will pop first. it will be agreed in DC and Brussels to sacrifice the chinese. they will be left holding paper with 1 billion mouths to feed. 

Sun, 07/10/2011 - 23:28 | 1442568 mt paul
mt paul's picture

might be time 

to move to kashgar

get a donkey cart

grow melons.. 

enjoy the dry breezes 

off the Taklimakan desert...

Sun, 07/10/2011 - 23:28 | 1442572 Manthong
Manthong's picture

Silver in Chinese is "yin”. The word for bank in Chinese is “yin hang” (silver house).

Renminbi is "peoples currency" in the PRC and in traditional Chinese is “pinyin”.

So… Yin Bitchez ???

http://en.wikipedia.org/wiki/Renminbi

http://mandarin.about.com/od/dailymandarin/a/yinhang.htm

Sun, 07/10/2011 - 23:31 | 1442582 HungrySeagull
HungrySeagull's picture

If China Silver House is only standing Metal Exhange in this world, they can say Panda Coin 10,000, ASE 0.10

CME is turncoat turning into the Benedict Arnold of our time.

Mon, 07/11/2011 - 10:06 | 1443464 Sudden Debt
Sudden Debt's picture

Rubber in Chinese is "Condom".

It also means: "No strings attached"...

and that's why there are 1.3 billion of them over there...

 

Sun, 07/10/2011 - 23:29 | 1442577 slewie the pi-rat
slewie the pi-rat's picture

the crimex sez:  Accordingly, a need for capital risk management tools for the Chinese currency has emerged.

translation:  we need china's capital.  they can print yuan and sell it thru us, then they can buy Treasuries with the green stamps. 

actually, i haven't a clue, as usual...but, with china + banksters + crimex, i'm sure we'll all dream of unicorns & teddy bears, tonite!

Sun, 07/10/2011 - 23:32 | 1442584 HungrySeagull
HungrySeagull's picture

No my dreams of a dark sky with glowing ashes on a scale never before seen.

Sun, 07/10/2011 - 23:30 | 1442578 camoes
camoes's picture

So are we going to blame JPM if the renmimbi plunges after it starts trading at CME?

Sun, 07/10/2011 - 23:34 | 1442593 TruthInSunshine
TruthInSunshine's picture
by camoes
on Sun, 07/10/2011 - 23:30
#1442578

So are we going to blame JPM if the renmimbi plunges after it starts trading at CME?

Let me rephrase that question, properly:

So, why wouldn't any rational human being blame JPM for being at least partly responsible for rigging renmimbi movements in ways beneficial to whatever its interests are at any particular point in time?

 

Much better.

Sun, 07/10/2011 - 23:31 | 1442583 PulauHantu29
PulauHantu29's picture

The King is Dead!

Long live The Queen!

Sun, 07/10/2011 - 23:37 | 1442585 rapier
rapier's picture

This is an odd one.  The settled price is the price  "published", meaning set by the  the PBC. Exactly how is that a market?   How is that even possible or rather why trade something whose price is set outside the market?   Maybe I am missing something.  Isn't the settled price supposed to be the price at the market in question? In this case in Chicago at the CME not on some piece of paper issued in Bejing by the PBC.

Sun, 07/10/2011 - 23:40 | 1442606 infiniti
infiniti's picture

+1.

Mon, 07/11/2011 - 07:45 | 1443029 OddFieldIsStrong
OddFieldIsStrong's picture

You made the implicit assumption that the hook-up between CNY and USD will remain. I see this CME future as creating a market for betting on the unhooking of CNY.USD.

 

 

Sun, 07/10/2011 - 23:32 | 1442586 unununium
unununium's picture

> what soon will allow everyone to denominate their liability exposure into the Chinese currency

I'll take my liabilities in dollars, and assets in RMB, thank you.

Sun, 07/10/2011 - 23:33 | 1442588 zorba THE GREEK
zorba THE GREEK's picture

 Maybe U.S. Treasury should print new dollar on softer paper so it will always have some value.

Sun, 07/10/2011 - 23:34 | 1442592 caerus
caerus's picture

Cotton's too expensive...

Sun, 07/10/2011 - 23:35 | 1442594 HungrySeagull
HungrySeagull's picture

How "Charmin"

Sun, 07/10/2011 - 23:36 | 1442599 caerus
caerus's picture

that's pretty funny

Sun, 07/10/2011 - 23:36 | 1442600 HungrySeagull
HungrySeagull's picture

Thank you, I tried.

Me not smart you know.

Sun, 07/10/2011 - 23:37 | 1442602 infiniti
infiniti's picture

Despite the nonstop anti-dollar rhetoric on this site, there's no way that ZeroHedge staff would choose to hold CNY over USD.

China has proven themselves to be the king of money printing.

Sun, 07/10/2011 - 23:43 | 1442611 HungrySeagull
HungrySeagull's picture

We are not Anti-Dollar.

(Insert a suitable pause prior to Tyler replying "WHOSE this WE?!")

I think that we are as the Calvary engaging the enemy far ahead of friendly lines in small numbers using knowledge, speed and mobility to keep one step ahead of defeat while buying one more hour, one more day or one more month for the blessed Sheep herd in the rear.

Sun, 07/10/2011 - 23:51 | 1442619 caerus
caerus's picture

The U.S. Government is anti dollar!  the Peeps in power are anti dollar!  I am naive enough to still believe that the average American deserves at the very least the right to fail!  The dollar is dead my friend, most have not realized it yet.

Sun, 07/10/2011 - 23:44 | 1442612 Joebloinvestor
Joebloinvestor's picture

If you read this:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azu2GgdtzJqQ&refe...

"China boosted its gold reserves by 76 percent since 2003 and has the world’s fifth-biggest holding by country, said Hu Xiaolian, head of the State Administration of Foreign Exchange."

The next reserve currency will be backed by precious metals and be viable for a very long time.

 

Mon, 07/11/2011 - 01:12 | 1442723 infiniti
infiniti's picture

China's money supply has grown at a mind-boggling rate over the past decade. Far far in excess of their gold holdings. Didn't you read the ZeroHedge article regarding China's food prices rising 16%? If China says 16%, it's a manipulated number so it's probably more like 25 or 30%.

The next reserve currency will NOT be backed by precious metals. There are not enough precious metals in this world that can be accumulated by a single government while simultaneously being liquid enough to accomodate global trade.

Sun, 07/10/2011 - 23:59 | 1442626 user2011
user2011's picture

Actually, I think it is an attempt to force the Chinese dollar to go floating.   Officially, Chinese dollar is pegged to US.   But this future contract is the back door way to pry open the "fair market value".   I consider this is an attempt to sink the export for Chinese.

Mon, 07/11/2011 - 00:08 | 1442638 caerus
caerus's picture

the chinese hold waaay too much u.s debt...they'll do it...just slower and smarter

Mon, 07/11/2011 - 00:08 | 1442639 zorba THE GREEK
zorba THE GREEK's picture

 For now, dollar still best currency including Swiss (overpriced) because it will be last to fall of 

 all major currencies. Every other major currency has issues. Dollar is world reserve currency

 with no viable contenders at this time. "It's good to be the king" as Mel Brooks once said.

 So for now, besides being 95% in physical gold and silver, I will keep the remaining 5% in

 dollars.

Mon, 07/11/2011 - 06:37 | 1442962 bigwavedave
bigwavedave's picture

yo Zorb. you are on the right track. depends how much you got. some people might need more USD to tide the thing over. % doesnt work in this calc. You need time as the function. so for example. I have 40 years in production land (rice, coffee, cocoa and vanilla) and 5 years of USD spend (at current rates). The rest I have in PM's. 

Mon, 07/11/2011 - 00:11 | 1442645 caerus
caerus's picture

The inquisiiiitition...let's begin...great movie!

Mon, 07/11/2011 - 00:34 | 1442666 chirobliss
chirobliss's picture

This is all just hilarious.  Twelve months ago I remember everyone here all atwitter about the possibility of the rouble as a reserve currency.  Murmurings about the CNY continue to bubble up through the ether of ill-informed misinformation that substitutes for analysis in EVERY media format.

Instead of being afflicted with the absurdist ABTD (anything but the dollar) obsession, it would be nice if someone, anyone, would say hang on a second, are we all ready to have world economic policy set by the Communist Party of China?  Do any of you actually stop for a minute and think about the consequences of the insane nihilistic celebration you are involved in?

Mon, 07/11/2011 - 01:01 | 1442706 bakken
bakken's picture

The dollar sucks, but that doesn't mean it isn't a hell of a lot better bet than Chinese toilet paper.

5+year time frame, long $$$, simply on the basis we have land, we have CLEAN water(too much right now) and most of the air here in the USA is breathable even in the big cities.  The Chinese can't say that.  F**k the PM shit, there are huge assets in the USA which will be available for $$$.

The Chinese are running on quicksand.

Mon, 07/11/2011 - 00:37 | 1442667 dracos_ghost
dracos_ghost's picture

Liquidity play.

China can't even sell their own debt, never mind buy anyone else's:

http://www.bloomberg.com/news/2011-07-11/china-three-year-local-governme...

SHIBOR killing mainland bankers.

PBoC going after the sucker western hedgie.

Let's see what creative algos are developed to trade a pegged f&*king currency.

Mon, 07/11/2011 - 00:40 | 1442672 chirobliss
chirobliss's picture

+10, a thinker, bliss!!

Mon, 07/11/2011 - 03:07 | 1442717 TruthInSunshine
TruthInSunshine's picture

It is said that on a relative basis, China operates with even less transparency than even our criminal governments in the west, and thus, there should be consideration given to the claims that the PBOC is sitting on potentially far larger loan losses and toxic assets, as a % of GDP, than many if not nearly all developed, major western governments.

Whether this is true or not, time will tell, but many native-Chinese economists who are free to speak openly (because they are no longer in China), claim that this is indeed the case, and that the level of graft and corruption amongst regional banks and Chinese corporations is staggering.

 

But look at what just popped up as a headline on RAN Aquawk:

 

So I guess China swears everything is A-OK. /sarc/
Mon, 07/11/2011 - 00:43 | 1442676 Vint Slugs
Vint Slugs's picture

Why should the floating of a new futures contract, i.e., the renminbi in this case, be a probable "nail in the dollar's coffin"?  Assuming the title means the coffin that will be the dollar's reserve currency status.  Any organization, excluding penny-ante futures funds, already is able to forward contract via its commercial bank as much dollar value/volume as it wants in Chinese renminbi.

All the proposed new futures contract does is to open up to the relatively small institutional or individual trader the opportunity that already exists for any organization of size.

Also, why assume that the renminbi contract will succeed?  As recently as 2004 the CFTC research department reported that, since 1940 the survival rate of new contracts is as follows:  72% survive 1 year; 44% survive 3 years and 20% survive 10 years.

If you want to put a legitimate nail in the coffin of the USD as a reserve currency that devolves from China, read the following re China's silver: http://professorfekete.com/articles%5CAEFTheMarginalUtilityOfSilver.pdf

Mon, 07/11/2011 - 00:47 | 1442681 What_Me_Worry
What_Me_Worry's picture

Put otherwise, with one fell swoop the CME will now allow one to pretend to transform liability risk, credit and maturity of underlying assets from one currency to another, while on margin(with absolutely zero chance of actually taking delivery should TSHTF).

Mon, 07/11/2011 - 00:58 | 1442687 Yen Cross
Yen Cross's picture

 I have been able to spot trade usd/cyn for quite some time now...  In all actuality,

  it will probably help with transparency. Eg; Hasten yuan revaluation, put pressure on input costs and labor costs...   It will also increase scrutiny of/on PBoC financial statistics...

Mon, 07/11/2011 - 01:11 | 1442721 bakken
bakken's picture

Seems no one is facing the possibility of a sudden liquidity choke in China, and then the resulting chaos and collapse of Ponzi debt contracted by local govs.  That  to me says,  Yuan goes LOWER even if only on anxiety, short term.

If the crunch bites deeply the Chinese may hold the Yuan low to save their only profitable market, the USA.  Why does everyone assume the only way to go for the Yuan is up?

Mon, 07/11/2011 - 07:20 | 1442992 Zeilschip
Zeilschip's picture

So you'll short the yuan on Aug 22? Or is it just wishful thinking?

Mon, 07/11/2011 - 01:12 | 1442724 defender
defender's picture

I was hoping to see your thoughts.  Do you think that this is a first step in a floating currency announcement?

Mon, 07/11/2011 - 02:09 | 1442807 Yen Cross
Yen Cross's picture

  Yes,  China is a commodites Whore... Commodities are priced in USD. A revalue strengthens the yuan, thereby lowering input costs. Did you catch the China inflation # over the weekend? Take a peek...

Mon, 07/11/2011 - 01:09 | 1442714 youALREADYknow
youALREADYknow's picture

This isn't news. I've been trading spot FX and GLOBEX futures contracts on CNY for years.

The only news event would be if PBoC stopped price fixing and allowed a true unmanaged float. Even a move to a wider floating band would be news.

Mon, 07/11/2011 - 01:39 | 1442775 TruthInSunshine
TruthInSunshine's picture

China floats its currency giving prevailing economic groupthink = massive ramping up of unemployment in China and economic contraction, which gives rise to social instability and a true Jade Revolution -

-or-

-China continues to absorb inflationary hits in a bid to keep employment stable, with the central planners mitigating the inflationary pain with greater levels of subsidies on necessities (drawing down on alleged Chinese surplus).

 

Hedge accordingly.

Mon, 07/11/2011 - 06:23 | 1442950 bigwavedave
bigwavedave's picture

#1 is a non starter - they are even more status quo than we are

#2 is current policy - QE2 was all about replacing Chinese demand for UST (perhaps as an exercise. meaning showing them we have the mechanisms to do it).

The Chinese now hold all the cards. As worthless as the game is those cards are not ivory marjong blocks.... They will diversify to Euro. Then the great AXIS game will show its true value. The end of China as an antigonistic force in the world will be played the same way as the end of the USSR. All politics is local.

Game on!

 

 

Mon, 07/11/2011 - 06:47 | 1442965 Yen Cross
Yen Cross's picture

Respectfully Dave 8/10's of your post are correct. China has massive issues. Qe-2 was about moving money to the highest Interest rates.. The United States holds all the tech Cards.. Unless you are buying Paper Mache` stealth F-111-s?

Mon, 07/11/2011 - 02:18 | 1442813 strannick
strannick's picture

The Yuan trading on margin, on the CME is going to bring greater transparency and price discovery? Just like it has done in silver?

Traders will again be stepping into JPMorgan's rigged CME casino, with Jeffrey Christian in his polyester tux at the Black Jack table. Might as just walk in wearing barrel with straps from the get go.

Mon, 07/11/2011 - 03:33 | 1442851 Yen Cross
Yen Cross's picture

 Metals are finite. Currencies are not.

Mon, 07/11/2011 - 04:31 | 1442881 strannick
strannick's picture

JPM's supply of silver shorts is also infinite.

Mon, 07/11/2011 - 05:18 | 1442905 Yen Cross
Yen Cross's picture

 lol+1 good one...

Mon, 07/11/2011 - 02:52 | 1442834 sbenard
sbenard's picture

There were already Renminbi futures. The symbol I've used to trade them is RMB. Apparently, they are now initiating the currency pair futures. I hope the new one is more liquid. The volume for RMB was terrible.

Mon, 07/11/2011 - 03:19 | 1442845 carbonmutant
carbonmutant's picture

 The Yuan needs to find a currency to peg itself to first.

How's that Euro trade coming this morning?

Mon, 07/11/2011 - 03:35 | 1442854 Yen Cross
Yen Cross's picture

  Good post Carbon. That is why PBoc is unloading s/t treasuries, and buying Piigs debt @ highly discounted rates.

Mon, 07/11/2011 - 06:30 | 1442954 bigwavedave
bigwavedave's picture

YC there is of course a bigger picture. there is always a bigger picture. see my previous replies in this thread. the chinese are fucked and they are starting to know it. they have a very very full house. aces over kings. the USA has a pair of two's and so does Europe. thats four fucking two's. LOL 

Mon, 07/11/2011 - 07:22 | 1442995 Yen Cross
Yen Cross's picture

 I Like you!! Please keep up the great posts... You have BALLS.

Mon, 07/11/2011 - 09:05 | 1443253 qussl3
qussl3's picture

The Chinese play "dai di", or Big Two.

In their world the 2s are king.

Mon, 07/11/2011 - 04:27 | 1442880 Urban Redneck
Urban Redneck's picture

 

The CME is just trying to get and maintain market share.

A one-penny tack is technically a nail.

The way I read the contract spec- it is denominated in CNY but settled in USD- the exact same contract settled in CNY would be a much more profound (although still subtle) shift.

 

 

Mon, 07/11/2011 - 05:35 | 1442913 JuicedGamma
JuicedGamma's picture

If the future at all resembles the past, this will be the most boring contract ever, bar none.

At least it won't be as broken as having VIX futures with a monthly expiry.

Mon, 07/11/2011 - 05:58 | 1442931 Yen Cross
Yen Cross's picture

 I would be paying more attention to the XLF and transports personally.

 

              VIX of what? Crude, Equities? Metals? Commodities? DARK POOLS?

Mon, 07/11/2011 - 07:14 | 1442983 JuicedGamma
JuicedGamma's picture

http://cfe.cboe.com/Products/Spec_VIX.aspx

SnP 500, not aware of any other listed VIX future.

Mon, 07/11/2011 - 07:28 | 1443001 Yen Cross
Yen Cross's picture

 OOPs those Gamma  Ray bursts can be blinding.  I'll put together a package for you.

   Have you heard of Sector trading? have you heard of Russell and NAQ vix? transport VIX?  Durables VIX? Cyclicals VIX?

Mon, 07/11/2011 - 07:50 | 1443042 JuicedGamma
JuicedGamma's picture

Here's the point: yuan futures will barely budge, unless the peg fails, I suppose that's possible. Kind of like shorting treasuries, it's a long road, your solvency/sanity at risk.

As for VIX futures, they don't move with cash and are thus (in my opinion) broken. They would be much more sensible if they expired daily with a suite of long range contracts as well.

Mon, 07/11/2011 - 08:08 | 1443082 Yen Cross
Yen Cross's picture

 I trade mostly SPOT.. I enjoy your input. Thank you. The CME  post is just a tighter Liguidity/spread mark...  Personally I proxy the YUAN... I don't care for the Chinese.. My posting record reflects that.

 

                   Your VIX quote was very "Astute" Nice Mind...

Mon, 07/11/2011 - 08:09 | 1443086 tradewithdave
tradewithdave's picture

Are you like Dorothy and find yourself in an endless search for the Oz of Chinese exchange rate price discovery?  Then follow, follow, follow, follow, follow the BlackRock road.

http://tradewithdave.com/?p=7269

Dave Harrison

www.tradewithdave.com

Do NOT follow this link or you will be banned from the site!