Spearheaded by Canadian lawmakers as part of policies to strengthen its relationship with China, the Canadian- based RMB Hub for the Americas has officially launched this week. Kicking off the launch was the first made at BMO Financial Group’s Toronto headquarters and included the presence of Toronto Mayor John Tory, BMO CEO Bill Downe and other company executives.
The launch of the RMB Hub comes as research reports from from BMO showed that China became Canada’s second largest trading partner in 2014. In addition, last year, the Chinese renminbi itself increased its popularity, as it broke into the top five currencies used globally for payments, coincidentally knocking off the Canadian dollar which had held the number five ranking in 2013.
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As Canada’s involvement with China has increased, the RMB Hub is expected to provide cost advantages to Canadian firms which transact with the RMB, and will have access to increased liquidity and more favorable exchange rates with the local hub. The first such hub opened in both North and South America, financial institutions across the Americas are expected to be able to achieve economic benefits for their physical RMB transfers from the new trading portal. While virtually located in Canada, trading of the RMB will be denominated in US dollars, with immediate conversion available to and from Canadian dollars.
Commenting about the economic benefits the RMB Hub provides, C.J. Gavsie, Global Head of FX Products & China Capital Markets, BMO Capital Markets, who initiated the first trade stated publicly, “As we’ve seen in other jurisdictions with RMB hubs, the cost savings will lead to more trade. This, in turn, will create more jobs in North and South America. For our U.S. clients in particular, the hub will deliver the price transparency the open market provides when trading for RMB.”