Is now the right time to trade the Chinese yuan?
City Index March 6, 2015 5:30 PM
<p>Ashraf Laidi outlines why now could be the ideal time to trade the Chinese yuan…. As China takes fresh steps to allow its currency to […]</p>
Ashraf Laidi outlines why now could be the ideal time to trade the Chinese yuan….
As China takes fresh steps to allow its currency to move more freely, the Chinese yuan is generating more interest from traders and investors.
Chinese consumer demand, industrial production and inflation have all continued to slow since mid- 2014. Chinese loan demand reached its lowest level since Q4 2009 and inflation hit five-and-a-half-year lows. This forced the Chinese government to downgrade its target for 2015 economic growth to 7% from 7.5% in 2014 – the lowest growth rate in 24 years.
In efforts to support the economy, the People’s Bank of China cut interest rates twice between November 2014 and March 2015, bringing them to four-year lows. This pushed the CNH lower against all major currencies.
Since peaking against the US dollar in January 2014, CNH fell nearly 4% – its biggest decline against USD since China revamped its currency structure in 2005.
As China is anticipated to further lower interest lending/borrowing rates, CNH may fall further against the US dollar, especially if the Federal Reserve is expected to raise rates for the first time since 2006.
And, with the Chinese yuan now available for spread betting and CFDs, you’re no longer limited to the Australian dollar as the only proxy for China.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.