Forex Blog: Currency Trading News & Analysis.

April 17th 2006

Markets assume gradual Yuan increase

This week, Hu JinTao, Prime Minister of China, will visit the United States for the first time since he assumed power. As you probably guessed, the Yuan will be a hot topic of conversation between Chinese and American officials. It bears mentioning that American politicians continue to call for a 25% increase in the value of the Yuan, as economists feel the Yuan is undervalued. However, forex markets reflect slightly different expectations with regard to the path of the Yuan. Specifically, Yuan currency futures indicate investors believe the Yuan will only appreciate 2.8% this year. Non-deliverable Yuan forward contracts, which serve a similar purpose, have priced in a 3.1% gain. While there remain a few analysts that believe the Yuan will rack up double digit gains against the USD this year, the majority of traders expect the Yuan to continue appreciating gradually. Reuters reports:

JP Morgan…expects the dollar to fall to 7.00 yuan by the end of this year, but admits that the market is pricing in less than a 2 percent chance of this occurring.

Read More: Currency markets bet on small yuan appreciation

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© 2004 - 2023 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.