Forex Investment and Currency Trading

There has been much recent speculation that China has changed its FX policy and no longer wants a fast appreciation of the Chinese yuan (CNY). People who have this view use the recent consolidation in USD-CNY to support their case. However, a more detailed examination of CNY trading patterns against China’s major trading partners suggests that CNY appreciation has accelerated rather than slowed – against other currencies than the USD. This leads us to the view that the People’s Bank of China (PBoC) may now be managing the CNY on a NEER (Nominal Effective Exchange Rate) or trade weighted basis [...]

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The USD Collapse
We have entered a new world – scared rather than brave. Since the start of 2008, the DXY (USD) index has declined by -6% and with more bad news likely to come out of both Wall Street and Main Street over the next few weeks, there is little reason to be bullish on the U.S. economy or the USD near term. Further deterioration is likely. This is significant for the CNY since it seems to us that China’s currency has been targeting a gradual appreciation against the USD, rather than the basket. In practice, this regime has delivered [...]

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Market is perplexed by the magnitude of the SGD appreciation of late, breaking below the key support level of 1.3800.  EUR/CNY and EUR/SGD are nearly identical in trade patterns and there is the thought that the MAS may be waiting to see what the PBOC does with its currency.  There were several rumors that the PBOC was going to be forced to reval its currency lower again to help combat the increased inflationary pressure that the country is seeing…not from the US but from Europe.  The EUR has literally screamed higher against CNY at the same time that Euro-area export growth is [...]

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