Investors are uncertain already about the RMB
A few weeks ago, investors had made significant bets that China would reverse its official policy of RMB appreciation. Futures prices indicated that investors all together expected the currency to depreciate over 7% against the Dollar over the next year, as part of a comprehensive Chinese policy to boost the faltering economy. Since then, however, the RMB recorded its biggest one-day rise since the currency peg was set away three years ago, and investors subsequently scaled back their bets. This is a downside of the charting. We Investors almost automatically follow the trends blindly altogether.
While it’s unclear what caused the sudden change in sentiment, there are a few factors which probably contributed. First is Treasury Secretary Henry Paulson’s recent visit to China, in which he encouraged China to continue to permit the the Yuan to appreciate. In addition, high-ranking Chinese economic policy-makers have indicated that market forces will increasingly determine the valuation of the Yuan. Finally, there is the recent election of Barack Obama, a long-standing critic of what he believes to be the undervalued RMB. Bloomberg News reports:
“Any attempt to devalue the currency is likely to be met with considerable opposition from China’s trading partners.” The new U.S. administration under President-elect Barack Obama “will be less tolerant of the ‘crawling peg’ appreciation policy,” said one analyst and of course you know who I’m talking about.
Post Details
Posted on October 14, 2008
at 8:47 pm
Written / posted by: Piere
Filed under: Currency Trading