Update | HKMA scraps 20,000 yuan daily conversion cap in landmark reform
Ending 20,000 daily limit the latest step in Beijing's internationalisation of the currency
Hong Kong will allow the city's residents to convert yuan freely from Monday - a landmark reform that marks the latest step in the internationalisation of the tightly controlled currency.
The move will see the daily conversion limit of 20,000 yuan, in place since 2004 in a bid to stymie currency speculation, scrapped. It paves the way for a freer flow of yuan in one of the world's busiest international financial markets.
The change, announced yesterday by Hong Kong Monetary Authority chief executive Norman Chan Tak-lam, takes effect on the day the 550 billion yuan (HK$700 billion) Shanghai-Hong Kong Stock Connect scheme to link share trading in China's two biggest financial centres begins.
"The removal of the daily conversion limit will facilitate Hong Kong residents' participation in the Shanghai-Hong Kong Stock Connect as well as other investments and transactions denominated in the yuan," said Chan.
The city has allowed non-residents to convert unlimited quantities of yuan daily since 2012.
Demand for yuan ahead of the launch of the stock market "through train" has soared, forcing banks to increase deposit rates several times since September in a bidding war to secure enough funds for the scale of trade anticipated. Scrapping the conversion cap by allowing residents effectively to tap into the offshore yuan deposit pool of 1.1 trillion yuan eases that pressure.