China's Renimbi / Yuan Updates.

Did you notice in the last few months, that China has been establishing agreement after agreement with various major financial centres around the world, so that payments could be settled using the Chinese yuan? That's right. It would appear that world leaders have been in a race to make certain the yuan stopped at their country next. 

March 2014

Bundesbank, PBOC in Pact to Turn Frankfurt into Renimbi Hub, Bloomberg Businessweek, March 28

"Germany's Bundesbank and the People's Bank of China agreed to cooperate in the clearing and settling of payments in renminbi, paving the way for Frankfurt to corner a share of the offshore market.

Germany's financial capital prevailed over Paris and Luxembourg in a euro-area race to win trade in renminbi, which overtook the euro to become the second-most used currency in global trade finance in October, according to the Society for Worldwide Interbank Financial Telecommunication."

April 2014

Bank of England and People's Bank of China Agree on London Yuan, Clearing Hub, International Business Times, April 14

"Britain and China have signed a deal to set up a yuan clearing service in London, marrying future financial transactions between the Bank of England and People's Bank of China...

Chancellor George Osborne has been focusing on the world's second largest economy and has been keen to open a yuan trading hub in the capital city as the currency poses stiff competition to the US dollar as a global medium of exchange."

May 2014

China and Russia Ink $400 Billion Gas Deal, USA Today, May 21

"China and Russia signed off on a huge gas deal worth as much as $400 billion Wednesday that heralds a pivot east for Russian business amid ongoing tensions with the West over Ukraine, though few details of the deal were made public.

The 30-year gas-export contract, seen as a move by Russian President Vladimir Putin to aggressively shift the country's commercial interests east amid mounting sanctions from the United States and Europe, was signed as the Russian leader has enjoyed a warm welcome in China, where the two countries have inked a raft of agreements during his ongoing, two-day visit."

June 2014

Russia considers yuan, ruble for Chinese gas deals; Government Had Considered Using the U.S. Dollar, UPI, June 26

"The head of the accounting department at Russian energy company Gazprom says there's no risk in using either Chinese or Russian currencies for gas transactions.

'In regard to using the yuan or rubles in accounting, we are basically ready for that, we think that this is completely normal,' Gazprom finance chief Andrei Kruglov said. 'There are no risks for Gazprom, except for minor transaction expenses.'"

China to Set Yuan Clearing Bank in Sydney, Australia, Channel News Asia, June 26

"China will designate a clearing bank in Sydney for overseas trading of its yuan currency, a top Australian official said on Thursday as Beijing seeks to make the tightly-controlled unit more international.

Chinese President Xi Jinping is due to visit Australia in November for a summit of the G20 group of nations, and Hockey said the two countries hope to reach a free trade agreement before the end of the year."

China signs yuan accords with France, Luxembourg, The Bull.Asia, June 30

"China's central bank said it has signed agreements for yuan clearing arrangements with France and Luxembourg, with the aim of promoting greater use of its currency overseas....

Yuan clearing in France and Luxembourg would allow companies and financial institutions to use the currency for cross-border transactions, as well as promote liberalization of trade and investment, PBoC said.

European countries are competing to become the dominant hub for yuan business in the continent."

July 2014

South Korea, China Agree to Direct Trade in National Currencies, RT, July 4

"South Korea and China have agreed to create a market for direct trading of the yuan and won, which is hoped, will help reduce the pressure of the US dollar, as well as cut foreign exchange costs and boost bilateral investment.

The memorandum of understanding (MOU) between China's central bank and the Bank of Korea to create a yuan clearing system was signed during Chinese President Xi Jinping's visit to South Korea on Thursday. The leaders of both countries pledged to sign an agreement by the end of the year... The establishment of a won-yuan market may make bilateral trade easier, and reduce the pressure of the US dollar on the Korean currency.

China also provided South Korea with a $12.8 billion quota to invest in national capital markets, the same amount the UK and France have been granted."

China Signs Currency Deals, Except in the U.S., Wall Street Journal, July 10

"In recent years, China has signed a flurry of currency deals with countries around the world. One notable absence: the U.S.

The Chinese government has been pushing for a greater role for the tightly controlled yuan in global trade, investment and finance, as part of its effort to revamp the country's creaky financial system and to one day challenge the U.S. dollar's dominance in the international monetary system. To promote the yuan on the world stage, Beijing has been trying to foster yuan-trading hubs outside the mainland by making it easier for foreign banks to obtain the yuan as well as to clear yuan-denominated transactions.

Gold Plunges Back Below $1300 As "Someone" Dumps $2.3 Billion In Futures

With The Fed proclaiming bubbles in some of the most-loved segments of the stock market and explaining that the economy is doing "ok" but they must remain dovish for longer for feasr of "false dawns"... what better time than now to dump $2.3 Billion notional in futures... of course the dump in gold's anti-status quo price coincided with an odd v-shaped recovery in stocks... Gold remains above its pre-June FOMC levels still.

The break was precipitated by the sale of over 17,000 contracts (or over $2.3 Billion notional)...

But for now gold remains above FOMC levels...

BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks

As we suggested last night, the anti-dollar alliance among the BRICS has successfully created a so-called "mini-IMF" since the BRICS are clearly furious with the IMF as it stands currently: this is what the world's developing nations just said on this topic "We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness."

As Putin explains, this is part of "a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies." Initial capital for the BRICS Bank will be $50 Billion - paid in equal share among the 5 members (with a contingent reserve up to $100 Billion) and will see India as the first President. The BRICS Bank will be based in Shanghai and chaired by Russia. Simply put, as Sovereign Man's Simon Black warns, "when you see this happen, you’ll know it’s game over for the dollar.... I give it 2-3 years."

• BRICS MINISTERS SIGN DEVELOPMENT BANK AGREEMENT
• INITIAL SUBSCRIBED CAPITAL OF BRICS BANK IS $50 BLN: STATEMENT

A quick take on existing monetary policy.

• MONETARY POLICY MUST BE CAREFULLY CALIBRATED: BRICS STATEMENT

The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other "developed world" central-bank dominated world and will provide their own funding.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion.This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 

Incidentally, the role of the dollar in such a world is, well, nil.

For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.

Key excerpts from the Full statement:

We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund's resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015.

BRICS, as well as other EMDCs, continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. We appreciate the work undertaken by our Finance Ministers. Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth.

The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion.This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.

Goodbye visions of an SDR-world currency. As for the USD...

Turnover of commodity exchanges down 65% in Q1: FMC

The turnover of commodity exchanges fell sharply by 65 per cent to Rs 14.55 lakh crore in the first quarter of this fiscal due to poor volumes in most commodities, the Forward Markets Commission (FMC) said.

The turnover at these commodity bourses stood at Rs 41.45 lakh crore in the same period last year.

Much of the fall was seen in bullion followed by energy, metals and agricultural commodities, FMC data showed.

According to the FMC, the turnover from bullion fell by 73 per cent to Rs 5,23,030 crore in April-June this year, against Rs 19,38,548 crore in the same period a year ago.

Similarly, the business from futures trading in energy commodities such as crude oil declined by 70 per cent to Rs 3,18,662 crore from Rs 10,45,990 crore, while the turnover from metals dropped by 61 per cent to Rs 3,12,859 crore from Rs 7,93,213 crore in the review period.

The turnover from agriculture commodities also fell by 18.23 per cent to Rs 3,00,690 crore in April-June of this year, as against Rs 3,67,711 crore in the corresponding months of 2013-14.

Analysts attributed the falling volumes to higher transaction cost after the imposition of commodity transaction tax (CTT) and the dent in investors’ confidence in the wake of the Rs 5,600 crore-payment crisis at the commodity spot exchange NSEL.

There are five national and nine regional level bourses operating in the country.

Anti-Dollar Alliance Prepares Launch Of BRICS Bank (Brazil, Russia, India, China and South Africa)

Three months ago we discussed in detail the growing anti-dollar hegemony alliances that were building across the BRICS countries (Brazil, Russia, India, China and South Africa). Their efforts at the time, to create a structure that would serve as an alternative to the IMF and the World Bank (which are dominated by the U.S. and the EU), appear to be nearing completion. As AP reports, Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth across the BRICS and hope to produce an agreement on the proposed institution at this week's BRICS Summit.

As AP reports,

Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth in Brazil, India, China, Russia and South Africa.

Rousseff received Putin in the presidential palace in Brasilia on Monday, a day before leaders of the five emerging BRICS nations meet in the northeastern city of Fortaleza.

Rousseff told reporters the bank would top the summit's agenda, adding she hoped the event would produce an agreement on the proposed institution.

She said the five countries "are among the largest in the world and cannot content themselves in the middle of the 21st century with any kind of dependency."

Brazil and Russia also signed bilateral accords on air defense, gas and education

The leaders who will be present (not so many big fans of the US there)...

They seem serious:

• *BRICS DEVELOPMENT BANK KEY TO FOSTER GROWTH IN GROUP: BORGES
• *BRICS BANK AT 1ST TO FINANCE EXCLUSIVELY INFRASTRUCTURE:BORGES
• *RUSSIA'S PUTIN SAYS COOPERATION WITH CHINA IS GROWING
• *PUTIN SAYS RUSSIA TO PROMOTE CURRENCY SWAP WITH CHINA: XINHUA

As we concluded previously, as RBTH reports, it seems the BRICS are not slowing down efforts to create their own IMF-alternative...

The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.

Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.

In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. "Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory," Lukov said.

It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries' economies.

...

The creation of the BRICS Development Bank has a political significance too, since it allows its member states to promote their interests abroad. "It is a political move that can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues. The stronger this union and its positions on the world arena are, the easier it will be for its members to protect their own interests," points out Natalya Samoilova, head of research at the investment company Golden Hills-Kapital AM.

Perhaps the following sums it all up perfectly...

Economists warn the IMF's legitimacy is at stake, and they say U.S. standing abroad is being eroded.

"Eroded" indeed...

*  *  *

Read more here on the BRICS morphing into an anti-dollar alliance...

If the current trend continues, soon the dollar will be abandoned by most of the significant global economies and it will be kicked out of the global trade finance. Washington's bullying will make even former American allies choose the anti-dollar alliance instead of the existing dollar-based monetary system. The point of no return for the dollar may be much closer than it is generally thought. In fact, the greenback may have already past its point of no return on its way to irrelevance.

Just in Modi to press for equal shareholding in proposed BRICS bank TOI
India will press for equal shareholding for its five member countries in the proposed $50 billion BRICS Development Bank so that no shareholder dominates.

London zinc hits near 3-year top on supply worries

* Shanghai zinc hits highest in 17 months
* Zinc, aluminium rallies unlikely to be sustained - Citi
* Aluminium cash prices reach highest vs benchmark since 2012

London zinc prices jumped to their highest level in almost three years on Monday amid prospects of falling mine supply, while copper prices steadied after four weeks of gains.

Given a generally brightening outlook for global demand, investors have been allocating funds to commodities that are expected to be in tight supply.

Zinc prices in both London and Shanghai have jumped more than 4 percent this month, while London copper and aluminium futures have climbed by more than 2 percent over the period.

"There is a structural story that people seem to buy into on zinc because we are losing supply in closures of huge mines such as (Australia's) Century. Then you have the technical signals which are also bullish," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

Century mine is the world's second largest zinc mine, and is scheduled to run dry in three years. It yielded 105,279 tonnes of zinc in the first quarter, down 31 percent from the previous quarter and 21 percent on a year ago. [ID:nL3N0DH0G6]

Zinc futures on the London Metal Exchange (LME) rose to $2,325 a tonne, the loftiest since August 2011. Prices could target $2,450 in the short to medium term, Schnider said.

Shanghai zinc ended up 0.9 percent at 16,410 yuan

($2,600) a tonne, having earlier reached 16,550 yuan a tonne - the highest since February 2013.

But uncertain demand from China, the world's top consumer of most commodities, is expected to cap gains in metal prices

"Sluggish growth in galvanised steel sheet production in China year to date ... and subdued Chinese construction do not support a bullish demand picture," Citi said in a research note.

"We expect a short-term correction and as such we forecast zinc to trade at around $2,000-2,200/t on a 3-6 month view."

Markets will be watching for China's money supply figures this week which may flag an improvement in factory activity in the coming months.

China's fiscal expenditure surged 26.1 percent in June from a year earlier to 1.65 trillion yuan ($265.84 billion), reflecting government efforts to speed up spending to shore up the economy.

China's GDP and industrial output figures on Wednesday this week will also give fresh direction.

LME copper was barely changed at $7,150 a tonne by 0723 GMT, after ending marginally higher last week. The most-traded September copper contract on the Shanghai Futures Exchange slipped by 0.2 percent to 50,670 yuan a tonne.

Reflecting improved investor appetite for copper, hedge funds and money managers raised their bullish bets on copper futures and options in the week to July 8, according to data from the Commodity Futures Trading Commission. In aluminium, prices have been driven by scant spot market supplies, which propelled cash prices to the highest against the benchmark since December 2012 on Friday .

LME aluminium was up slightly at about $1,946 per tonne, after rising for the past two weeks.

Higher cash prices will curb marginal profits for some financing deals that have locked metal away from the market, suggesting more stocks may be delivered to LME inventories.

"Producer selling appears to have capped the recent rally," Citi said. "We now see little prospect of prices now sustaining upside moves outside a $1,850-$1,950/t price range in H2."

CME Group Cutting Margins For Gold, Silver, Copper Futures

 CME Group is lowering margins for gold, silver and copper futures on the Comex division of the New York Mercantile Exchange.

The new rates will be effective as of the close of business on Monday, according to a notice from CME Group. The exchange operator said the changes were the result of “the normal review of market volatility to ensure adequate collateral coverage.”

Margins act as collateral on futures trades. CME Group also changed margins for electricity, equity-index, ethanol, natural gas futures and a number of other products.

In the case of the main 100-ounce gold-futures contract, CME Group trimmed the “initial” margin for new  speculative trades to $5,940 from $6,600. The “maintenance” margin for existing speculative trades, plus all hedge positions, was cut to $5,400 from $6,000.

For the 5,000-ounce silver contract, CME Group lowered the initial speculative margin to $8,250 from $9,075. The  margin requirement for maintenance speculative positions, plus all hedge trades, was lowered to $7,500 from $8,250.

For the Comex copper contract, the initial speculative margin was cut to $2,970 from $3,300. The margin for maintenance speculative and all hedge positions was reduced to $2,700 from $3,000.

CME Group also lowered the margins for the smaller-sized gold, silver and copper products, as well as aluminum and iron ore.