Bets on Renminbi (RMB) appreciation rose at a record pace in Hong Kong last month, as measured by the exchange of local dollars for yuan, global banking giant HSBC Holdings Plc said.

The exchange of Hong Kong dollars for yuan by HSBC's clients climbed more than 90 percent in March from a month earlier, the most since the lender started offering yuan transactions in the city in 2004, Francesca McDonagh, head of personal financial services at the bank, said Thursday.

"There is an increasing appetite among our retail consumers for RMB," said McDonagh, adding that "some of our customers are looking forward to appreciation."

Speculation is running high that China may allow the yuan to appreciate as it tries to avert the bursting of asset bubbles after stimulating an economic recovery last year with record new loans.

China will allow the yuan to appreciate by June 30 to curb inflation, a survey of analysts showed last week.

Expectations for an imminent rise in the value of RMB have also been fueled by increasing international pressure, despite possible opposite effects.

US President Barack Obama, pressed by the Senate, is urging China to allow a more flexible policy in the yuan, which has been pegged to the dollar since 2008.

Asia's strengthening expansion, driven by consumer spending and investment in China and India, means policy makers in several countries should embrace stronger exchange rates, the International Monetary Fund (IMF) said.

The IMF Wednesday joined international calls for gains in the currency to resume ahead of Thursday's meeting with finance ministers from the Group of 20 nations.

Yuan deposits in Hong Kong rose 12 billion yuan in the past year to stand at 66 billion yuan as of the end of February, according to data compiled by Bloomberg.

The Hong Kong dollar has been pegged to its US counterpart since October 1983.

A trading band was introduced in May 2005, allowing the currency to rise or fall only 5 Hong Kong cents on either side of HK$7.80 per dollar.

Options, which give buyers the right to buy or sell a security at a set price over a given period, show traders are sticking with bets that the Hong Kong Monetary Authority, the city's de facto central bank, will keep its 26-year-old peg, while contracts for the yuan point to gains in its exchange rate.

One-month implied volatility for the Hong Kong dollar shows traders expect swings in the currency of 0.34 percent, compared with 0.35 percent on December 31 2009, according to Bloomberg data.

The equivalent volatility gauge for the yuan was 3.1 percent, compared with 0.55 percent at the end of last year.

Twelve-month non-deliverable forwards reflect bets the yuan will strengthen 3.2 percent from the spot rate of 6.8262.

Bloomberg News

(HK Edition 04/23/2010 page3)