Forex Blog: Currency Trading News & Analysis.

May 6th 2005

China may delay Yuan revaluation

With regard to the Yuan’s revaluation, it is no longer a question of if- but when. Investors are extremely confident that China will soon revalue, with some predicting it will occur as soon as this summer. Most investors have backed up their predictions with bets in the currency. Non deliverable forward contracts are currently trading at a 6% premium, which reflect investors’ collective expectation that the Yuan will appreciate by 6% this year. Last quarter alone, $30 billion of speculative capital trickled into China. While some of this money is clearly ‘hot money,’ most of the investments represent long term commitments in China. In response, China may delay revaluation, so as not to reward all of the speculators, who stand to earn massive capital gains when China revalues. To stem the inflow of speculative capital, China has continued to squash rumors of revaluation. The Financial Times reports:

The expectation of this event will keep hot money flowing into China and the longer China delays the exchange rate adjustment, the more hot capital will move into China.

Read More: Asian currencies withstand Chinese talk

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Posted by Adam Kritzer | in Chinese Yuan (RMB) | No Comments »

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© 2004 - 2024 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.