Looser Chinese Currency Controls

Looser Chinese Currency Controls

By www.TheForexNittyGritty.com

To see a complete version of this
presentation and to obtain our free EBook
follow this link:
http://portal.sliderocket.com/BLOUC/Loos
er_Chinese_Currency_Controls2

Read the Forex Conspiracy Report for
insights into trading foreign currencies.
Get your copy at
http://portal.sliderocket.com/BLOUC/Loos
er_Chinese_Currency_Controls2

The announcement of looser Chinese
currency controls has been met with mixed
reviews.

www.TheForexNittyGritty.com

The US government, the Europeans, and
many others, would be pleased to see a
much stronger Yuan.


The thinking goes that a stronger Chinese
currency makes it easier to profitably export to
China.


At a time when the USA is slowly emerging
from the recession and Europe is back in the
red for a year, anything that creates jobs will
be welcome.


To a degree looser Chinese currency controls
are a surprise as China has studiously kept its
currency on the weak side by purchasing
foreign currencies, especially the dollar, with
its impressive export profits.


This is the game plan followed for years by
Japan, Taiwan, and others. Keep you currency
weak so that you products are cheap and
attractive in the two large and rich markets of
the world, North America and Europe.


The problem for China is that the other nations
of the world are dealing with more or less
battered economies across the board and have
ceased to be amused by the monetary policy of
the world’s fastest growing export economy.


However, barring an early Euro Zone debt
resolution, China will, itself, see slower growth
in the coming years.


How Is This Going to Work?


First of all, what Chinese authorities did was
allow the Yuan to float one percent up or down
in the Yuan – USD exchange rate during a
trading day.


The limit was half a percent.
This float is up or down from a benchmark rate
that the Central Bank of China sets every day.


Although the Yuan is able to float throughout a
larger range, the range is effectively set by daily
Chinese monetary policy.


If you wish to trade a declining Yuan based on
reduced exports or a rising Yuan based on global
recovery, remember that the range is still set by
Chinese monetary policy and not the market.
This can be a problem for long term traders.


However, the new policy of looser Chinese
currency controls provides traders with a
wider range in which to trade and, hopefully, a
little better chance of making profits.


What Are the Issues Regarding
Looser Chinese Currency
Controls?


The Yuan has appreciated by more than four
percent a year for the last half decade.
The Chinese government has been under
increasing pressure from North America,
Europe, and elsewhere to let it currency float,
without restraints.


The belief of many, outside of China, is that a
free floating Yuan will become much more
expensive making Chinese goods more
expensive and goods from North America and
Europe more competitive.


However, China recently had its first trade deficit
in more than a decade.
There is the prospect of a Chinese real estate
crash and less demand for Chinese goods due
to recession in Europe.


Thus it is not absolutely clear whether looser
Chinese currency controls will result in a free
floating Yuan that will simply continue to go up
or if it may even level off or go down.


As China loosens its currency controls it may be
easier to see which direction the market really
wants to take the Yuan.


In the long run China would like to see the
Yuan become one of the world’s reserve
currencies.


To get there they need to bite the bullet, engage
more thoroughly with other trading nations, and
let the Yuan find its own level.


For more insights and useful
information regarding the Forex
markets and foreign currency trading,
visit

Looser Chinese Currency Controls

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Mehr von InvestingTips

Mehr von InvestingTips (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (9)

Looser Chinese Currency Controls