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China's Yuan Climbs (USD/CNY) And Could Strengthen To 6.1

Published: 19 Jul at 4 PM Tags: Dollar, America, Australian Dollar, New Zealand Dollar, Australia, New Zealand, USA, China,

After declining for two days, speculation that China’s government will widen the Yuan’s currency trading band helped the Yuan gain.
For all bar one day this week the People’s Bank of China has cut the Yuan’s reference rate.

The Asian asset is currently trading against the US Dollar in the region of 6.1377 Yuan per Dollar. Today’s gains mean that China’s currency has trimmed its five day decline to 0.01 per cent, having climbed by 1.5 per cent against the US Dollar this year.

According to the China Securities Journal, the Yuan’s trading band should be increased. Capital-account convertibility should also be accelerated.

One industry expert asserted: ‘The authorities are committed to moving to a more market-based exchange rate, including a further widening of the exchange-rate band.’

Meanwhile, Capital Economics has expressed scepticism regarding the view that the Yuan must weaken in order to hit its market value.

Some economists are even expecting the Yuan to strengthen to as much as 6.1 per Dollar by the end of the year.

Furthermore, after the PBoC asserted that it would remove the floor on lending rates offered by Financial Institutions, optimism regarding China’s growth prospects was boosted and the currencies of Australia and New Zealand (nations which rely heavily on China for trade) were able to strengthen.

The ‘Kiwi’ was able to jump to a month high while the ‘Aussie’ strengthened to 92.10 US cents.

The development prompted this response from currency strategist Neil Mellor: ‘It is more liberalization, more of what’s been promised and that can only be a good thing. The Australian Dollar particularly has been seen as a proxy trade for the Yuan because of the close ties between the two countries.’
As of Friday, 19th July 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP USD exchange rate was 1.5268, GBP AUD exchange rate was 1.6649, GBP NZD exchange rate was 1.9282, and GBP CNY exchange rate was 9.3715.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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