YUAN to overtake USD

Discussion in 'International Politics' started by aliyah, Apr 17, 2016.

  1. sob

    sob Moderator Moderator

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    Stop spreading fake news. China is not realising a new currency, rather they are introducing a new Yuan Gold Benchmark for Gold Prices.

    In simple terms China is going to Fix price of Gold in terms of Yuan and not Dollar. As the worlds largest importer of Gold they are flexing their muscle. But as long as the currency is not allowed to float freely, it will not be able to replace the US Dollar for the time being.

    http://www.reuters.com/article/china-gold-fix-idUSL3N17G1Z5

    From this article in Reuters

    No wonder Yuan is not the preferred Currency. Even PRC quotes it's Forex Reserves in terms of Dollars and that speaks volumes.
     
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  2. Indx TechStyle

    Indx TechStyle War Mongerer Veteran Member Senior Member

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    Today GDP in nominal vs PPP ratio is taken considering one in USA.
    Will that be replaced by China?
     
  3. sob

    sob Moderator Moderator

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    If you see the real value of Yuan would be much stronger than the nominal value of 1:7 ( Dollar to Yuan) that is pegged by the Chinese central bank.

    The data from China is highly suspect while the data from the US is more less without any manipulation or doctored. As long as this situation exists and the Chinese Central bank controls the Yuan Dollar rate other countries will not accept Yuan as an international currency. It will be used for trade with China only.
     
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  4. Zebra

    Zebra Senior Member Senior Member

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    Sir, what about that (year-2009) video which I posted in this thread. :biggrin2:

    Please check post #12.
     
  5. amoy

    amoy Senior Member Senior Member

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    For the time being, gold + precious metal pricing is done in London and New York.

    China launches yuan-denominated gold benchmark in Shanghai
    Source: Xinhua | 2016-04-19 18:39:14 | Editor: huaxia

    SHANGHAI, April 19 (Xinhua) -- China launched its yuan-denominated gold benchmark on Tuesday in Shanghai as it seeks to secure more sway in the pricing of the precious metal.

    The Shanghai Gold Benchmark Price (code: SHAU), is the quote for trading of 1kg, 99.99 percent purity bullion, denominated in the Chinese yuan and derived from multiple rounds of trading.

    The benchmark was set at 257.97 yuan per gram on Tuesday, the Shanghai Gold Exchange (SGE) said in a statement.

    The benchmark also lays the foundation for shifting bullion trading in Shanghai from mostly spot to derivatives to increase the appeal of yuan-denominated bullion trading as financial instruments for both domestic and global investors.

    SGE Chairman Jiao Jinpu said the launch of the benchmark offers the opportunity to develop bullion trading in China's financial markets and encourage more participation by global investors.

    Standard Chartered Bank (China) Ltd. and ANZ Bank (China) Ltd. are among 12 fixing members for the benchmark trading. The other ten members are domestic banks.

    The trading margin is set at 6 percent and transaction fees are exempted until June 30 this year

    [​IMG]
    http://news.xinhuanet.com/english/2016-04/19/c_135293860.htm

    ~~Still waters run deep. ~~from my MiPad using tapatalk
     
  6. sob

    sob Moderator Moderator

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    George Soros is the big guy in Forex Trade and has been blamed by many countries for their own weaknesses, notably the crash of the South East Asian currencies towards the end of the 1990s.

    As he had predicted in 2009, China has been given larger Voting Share in IMF, now Yuan is part of the basket of currencies of the IMF, but that is not sufficient for the Chinese and they have opened their own Multilateral Bank and India is also part of it.

    One interesting part of the video is where he says that since China has pegged their currency to the US Dollar, this will not allow the Dollar to weaken, since Yuan is one of the most undervalued currencies in the world.
     
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  7. amoy

    amoy Senior Member Senior Member

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    A Tale of Two Currencies: Hong Kong Dollar and Chinese Yuan excerpts

    [​IMG]


    Before 1994, despite of the divergence between the two exchange rates systems, the HK Dollar was not affected much by the Chinese Yuan as the latter was mostly used within mainland China. Over the next 10 years, both currencies were pegged to the US Dollar; thus the link between the two was stable. However, after the Chinese Yuan was de-pegged against the US Dollar last August, the link between the two systems has changed fundamentally.

    Two Systems Remain Two

    The Hong Kong Monetary Authority (HKMA) set a target rate for USD/HKD at 7.8000 and a tight floating band for the pair between 7.7500 and 7.8500. When the Chinese Yuan was de-pegged from the US Dollar on August 11, 2015; the Hong Kong Dollar moved lower against the US Dollar on the same day but then retraced the losses quickly. By the end of the month, the USD/HKD returned to the low end of the band where it had been before the Yuan’s adjustment – and notably despite the fact that the mainland stock market had plunged over 11% during the month.

    At this time, the Hong Kong Dollar – operating under a separate system from the Yuan – may initially enjoy a benefit of capital inflows that bolsters the HKD. When the capital flowed out from mainland China, they may first come to Hong Kong due to the financial links between the countries. That said, funds that were destined for further shores would in turn push the HKD’s value lower against the US Dollar as its primary anchor.

    There are a few advantages for mainlanders investing in Hong Kong: it is easy for them to transfer funds to the region under China’s current regulation on the capital account, for example, through the Shanghai-Hong Kong Stock Connect. They can use a wait-and-see strategy and may reinvest back to the mainland market if conditions improve. In September 2015, China’s foreign reserves dropped to $3.514 billion from $3.557 billion in August, while at the same time, Hong Kong’s foreign reserves rose to 345.8 billion from 334.4 billion.

    [​IMG]

    Two Systems Becomes One

    However, in January 2016 conditions further changed. The volatility in the Yuan and Chinese financial markets expanded to Hong Kong’s markets and its currency. Yuan’s offshore overnight borrowing rate, HIBOR, soared to 66.8% on January 12after China’s central bank (PBOC) intervened in the effort of squeezing out Yuan short speculations by tightening liquidity at Hong Kong commercial banks. The PBOC’s move at the offshore market, coupled with another plunge in Chinese stocks, has led to investors’ fears that the Hong Kong Dollar may be de-pegged from the US Dollar in the foreseeable future.

    In response to the market speculation, Hong Kong Monetary Authority said on January 27 that the regulator will protect HKD’s linked exchange rate regime. Yet, many investors no longer consider Hong Kong as a safe haven as they once had given increasing financial influence by mainland China.

    Long-Term Pressure on HKD’s Linked Regime

    Through March, the USD/HKD gradually fell back towards the bottom of its range. However, the pressure on the linked exchange rate regime hasn’t permanently vanished.

    For one, as discussed above, Hong Kong’s financial markets are highly impacted by mainland China. The Yuan exchange rate as well as China’s equity market remain is in a state of high volatility. During the NPC meeting in fact, issues related to the financial markets were directly in the spotlight.The securities regulator said thatthey will support the equity market for quite a long time before it regains stability. Thus, the uncertainty in mainland will continue to weigh on Hong Kong markets and its currency.

    More importantly, Hong Kong faces a fundamental problem if it retains a linked exchange rate regime. As an important intermediary between Mainland China and the rest of the world, its FX policy approach may conflict with the Yuan’s increasingly market-dependent status. Further, Mainland China, as Hong Kong’s most important trade partner, has been slowing down. At the NPC meeting, China lowered its growth target in 2016 to 6.5% to 7%. The slowdown has been hurting the Hong Kong’s economy as well. In specific, Chinese tourist arrivals to Hong Kong – which is considered a main driver to Hong Kong retail and real estate sectors–have declined significantly over the past months. In January 2016, the total visitor arrival from mainland China shrank by 10% than a year ago. Property prices in Hong Kong dropped by 9.5% over the past six months.

    Also, as the US Fed is likely to raise interest rates again in 2016 and then send the US Dollar higher, the linked Hong Kong Dollar would become more expensive than un-pegged currencies including the Chinese Yuan. This will further hurt Hong Kong’s retail and real estate sectors and exports.

    It hurts Hong Kong’s financial markets as well. Hong Kong was once the most popular offshore market for mainlanders to issue Yuan-denominated bonds, also called dim-sum bonds. In 2014, the volume of this debt issued in Hong Kong hit a historical high of 205.3 billion yuan, but then it fell to 17 billion yuan in 2015 after the Chinese Yuan was de-pegged against the US Dollar and significantly devalued. Chinese companies now prefer financing from European markets where interest rates are near zero (or even negative) thanks to the ECB’s quantitative easing programs.
     
  8. garg_bharat

    garg_bharat Senior Member Senior Member

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    It seems USA is intentionally weakening the dollar. The stock markets and gold are rising as a result.

    It is hard to see China's reaction. Logically Yuan should appreciate. But it has not done that; at least not as much as yen. Yuan is almost stable vs USD. Which means either capital flight from China is balancing the inflow, or there is some other hidden reason. It is clear that China has a lot of USD, which it can use for investment overseas.

    China is always a puzzle, understanding Chinese is like reading tea leaves.

    I would be more concerned about military moves rather than economic news at this point in time.
     
  9. sob

    sob Moderator Moderator

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    US is not intentionally weakening the Dollar, though they would like to have a weaker Dollar as it helps their exports and second as they have stopped Oil imports a weaker Dollar does not impact negatively. However due to the absence of strong data from the US economy and looking at the sluggish condition of the World Economy US Fed has decided to go slow on coming out of the QE. This has helped calm the jittery stock markets and also pulled the Dollar down.

    Officials whatever the Chinese may say, they have pegged the Yuan against the US dollar and control it in a very narrow range. In a bid to boost their exports they engineered a small devaluation of the Yuan. These controls will remain and this is what stops most of the world in freely accepting the Chinese Yuan as an alternative to the US Dollar.
     
  10. no smoking

    no smoking Senior Member Senior Member

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    On the contrast, USA is intentionally pursuing a strong dollar currently. Since last year, Federal reserve has been trying to raise the interest rate which will push the dollar value up. This policy may not be successfully so far, but they haven't give it up yet.

    No, Chinese won't appreciate her currency at current stage, because:
    1. Almost every Asian government is depreciating their currency at the moment, it will be foolish to appreciate Yuan alone;
    2. Yuan will join SDR this Oct, there is a huge amount hot money is betting on Yuan's appreciation, Chinese doesn't want them to win;
    3. China is reforming her industrial structure, an appreciating currency is the last thing they want this year.

    And no, yen's appreciation is against Japanese government's wish.

    I would be more concerned about military moves rather than economic news at this point in time.[/QUOTE]

    American, Japanese understand perfectly. If you link each country's military move to their economic policy, it makes perfect sense.
     
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  11. garg_bharat

    garg_bharat Senior Member Senior Member

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    Dollar went up by default as Euro went down due to Euro's own problems. Not due to some strong dollar policy.

    There is no reason why Yuan should stay at this level except by Chinese government manipulation. The world is awash in Chinese goods. The imbalance in trade should favor Yuan.
     
  12. no smoking

    no smoking Senior Member Senior Member

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    Yes, of course, quitting QE is not a strong dollar policy; raising interest rate is not a strong dollar policy either.

    Are you kidding me?

    Not necessarily. China's major customers (Europe and USA) are not paying their bill with Yuan and Chinese is spending more dollars than they earned from the trade. So, the market demand for Yuan is not increasing significantly. Since the demand is not going up, the price won't go up either.
     
  13. garg_bharat

    garg_bharat Senior Member Senior Member

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    Can you give a correlation of QE to Euro? The fact is Euro always goes up when easing is announced as growth expectations go up.

    Interest rates are very low in USA. A quarter percent hike is nothing. It is hardly strong dollar policy.

    The strength of USD vs euro was a result of perceived difference in economic prospects, nothing else.

    China is receiving lot of fx and is sitting on massive fx reserves. It does not need more. The yuan value is set by chinese government effectively. The demand and supply does not matter.
     

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