Forex Investment and Currency Trading

A greater emphasis on partnership rather than confrontation Whereas previous G7 statements have seemed confrontational on the issue of exchange rates, the Communiqué of 14th February appeared to emphasise solidarity at a challenging time. We compare below the February 2009 and October 2008 Communiqué, focusing specifically on the section on exchange rates. The bolded section reflects a change from the previous Communiqué:
“In particular, we welcome China’s fiscal measures and continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi in effective terms and help promote more balanced growth in China and [...]

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The Chinese yuan (CNY) has been on an appreciating path since its de-pegging and revaluation on 21 July 2005. The pace of this appreciation appeared to pick up sharply in Q4-07, in line with the public change in official rhetoric to “tight” rather “prudent” economic policy. Since then, a shift by the Chinese authorities has been noticed in Q1-08, which appeared to favour managing the CNY on a trade-weighted basis rather than just against the USD. Indeed, since April, the CNY Nominal Effective Exchange Rate (NEER) has appreciated sharply, helping to curb inflationary pressures in the process. Near term, market expects to see further [...]

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1 – 3 Month Outlook – CNY
China’s FX reserves soared by a massive $128.4bn in the first four months of the year as the authorities sought temporarily to stabilise the USD/CNY rate. Latterly, however, the Chinese currency has begun to appreciate once again, breaking below the 6.9 level. This positive trend is expected to continue in the short term.
6 – 12 Month Outlook – CNY Consistent appreciation
The full breakdown of 2007 nominal GDP by expenditure presents a picture of gradual growth rotation towards domestic demand and in particular a greater role for private consumption in the economy’s expansion. Especially [...]

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Spot

Non-convertible. Need a document asset transaction to be able to trade spot. Managed float vs undisclosed basket by CB, band width of +/- 0.5%, to last closing.

NDFS

NDFs typically trade up to one year, but longer NDFs possible up to five years, reasonably liquid and tenors stretch out to 10 years but infrequently traded. Standard size is up to USD 10 million.
Fixing time – 9:15 am – 9:30 am local time (Beijing), two days prior to maturity/value date.
Publication Site – Reuters SAEC. Bloomberg NDFF.
Publication Time – Fixing two days prior to maturity/value date.
Additional Comments – Fixing by PBOC with participation [...]

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