The board of directors of Hong Kong Exchanges and Clearing has decided to introduce yuan futures trading within six months in a bid to fend off competition from rival exchanges, according to a source at HKEx, which runs both the stock and futures markets. Yuan futures at HK$1 million per contract will be available against the US and Hong Kong dollars, the source said. All contracts will be settled in Hong Kong dollars. 'We do not expect very active trading because yuan spot trading is confined to a 0.3 per cent daily band,' the source said. 'It's difficult to have derivative products when spot trading spreads are that narrow. However, HKEx still needs yuan futures in order to be ready for the opening of the Chinese markets and the liberalisation of the currency policy. We have to prepare Hong Kong to be a yuan trading centre for China.' On August 27, the Chicago Mercantile Exchange, the largest futures exchange in the United States, launched the first yuan futures and options contracts against the US dollar, euro and yen. HKEx decided against launching any kind of options or futures against the euro and yen because they have yet to trade on the Chicago exchange since their debut. According to the Chicago exchange's website, yuan-US dollar futures have traded 2,193 contracts since their debut, including 932 contracts last month. 'It won't take long for HKEx to catch up,' the source said. The only yuan hedging tool available to investors at present is non-deliverable forward contracts. They are traded over the counter, usually among bankers, and are settled in US dollars. A Hong Kong banker said the market for HKEx's yuan futures would be more transparent than the over-the-counter market for such contracts. It should attract retail investors, too. 'I expect HKEx's yuan futures will receive a better response than the Chicago Mercantile Exchange's futures just because Hong Kong is closer to the mainland and investors here will have a greater interest in trading yuan derivative products,' the banker said. Future movements of the yuan are a hot topic for investors; many believe the currency has no choice but to appreciate because of China's strong export and economic growth and because of US political pressure for a stronger yuan. Since its revaluation in July last year the yuan has gained 3.3 per cent. It traded on Friday at 7.8525 to the US dollar. Two weeks ago the yuan had its biggest weekly gain in two months.