Cross-currency letters of credit gaining popularity in Asia

Divergent central bank policies see CNH LCs increasingly used to cover USD invoices

Dealers in Asia are seeing increasing interest in cross-currency letters of credit (LCs), with users looking to take advantage of preferable interest rates to finance dollar-denominated trade with foreign currencies.

Letters of credit are a common trade finance product issued by banks and serve as a buyer’s guarantee of payment to the seller until the final invoice is settled. The currency of the LCs is traditionally in line with that of the underlying trade invoice, usually denominated in US