User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Thursday May 5, 2005 - 13:36:26 GMT
INVESTICA Ltd - www.investica.co.uk

Share This Story:
| | Email

Waiting for Beijing - Yuan pressure will continue

There looks to be a 50% chance of a change in the yuan policy within the next few days. Initially, this would be likely to involve a relatively small widening of the trading band, potentially to around 5%, and a possible move to a trade-weighted basket. Markets would unlikely to be satisfied with a small move and there would be pressure for a further band widening over the next few months.

A yuan change would certainly not cure the US trade problem and inertia may still be seen as attractive by China, but the crucial factor is that the Chinese economy will increasingly demand a move away from a fixed currency regime. Even if a near-term shift is resisted, it strongly appears to be a question of when, not if, there is a policy change. On a six-month view, gains to 7.80-7.85 against the dollar appear realistic.

Although markets have to some extent discounted a move to let the yuan strengthen, there is still likely to be upward pressure on Asian currencies in general if the Chinese currency is allowed to appreciate. There would also be strong pressure for a change in the Malaysian currency peg. In global terms, there would be a small risk of a wider dollar selling, but overall upward pressure on the Euro should eventually ease slightly.

Yuan speculation intensifies

Speculation over a change to the Chinese exchange rate has intensified over the past week. The Securities Journal, a state-run newspaper, reported that following reforms of the commercial banking sector and foreign exchange market, conditions were now ripe for a policy change.

The Chinese markets will re-open from Sunday after a week-long holiday leading to speculation that the authorities are using the holiday period to prepare for a change in the currency regime. The rumours were also increased by the fact that the yuan briefly traded outside its official narrow band last Friday. Finance Minister Jin dampened expectations to some extent by stating that the market pressures made it difficult to sanction a move, but he also repeated the strong commitment to yuan reforms.

Economic pressures continue

The economic pressures for a change in the yuan policy will continue to build. China had a capital account surplus of over US$111bn in 2004 with a current account surplus of US$70bn. The authorities, therefore, bought close to US$200bn during 2004 to stem upward pressure on the yuan. Inflows will continue this year and it will be increasingly difficult to mange these inflows and avoid a destabilisation of the financial sector.

It will also be increasingly untenable to maintain a fixed yuan peg at the same time as allowing increased capital account freedom. The trade account recorded a US$16.5bn surplus for the first quarter of 2005, reinforcing complaints that the Chinese currency is undervalued by US and Asian economies. Estimates suggest the yuan could be overvalued by around 40%, but a currency move of this magnitude is highly unlikely

The strong investment inflows will also pose significant inflation risks. The evidence so far suggests that the pressures are manageable with headline consumer inflation below 4.0%, but there will be an increasing risk of hidden inflationary pressure. Investment levels also remain strong and there will be further pressure for a tighter monetary policy to curb investment and property capital spending. Higher interest rates would increase the risk of speculative inflows, although higher US rates should give the Chinese central bank greater freedom to tighten domestic policy without attracting fresh investment inflows.

Political demands also increase

The economic pressures have also intensified over the past few weeks with strong calls for Chinese action by senior US officials. In particular, the comments from Fed Chairman Greenspan were potentially important as Greenspan aims to tread carefully in the political arena and his comments suggest that he is expecting a near-term policy change.

The timing paradox

The Chinese authorities will continue to face the difficulty that they would like to change policy when attention is focussed elsewhere and the yuan is not a subject of speculative inflows. The difficulty is that any hint of a move or technical changes in preparation for a shift, leads to fresh speculative inflows which then, in turn, discourages any currency reform. Any small move will also create pressure for further steps. In this environment, the authorities will have to consider a sudden and possibly unannounced policy.

Dollar trends unlikely to help

The pressure for a yuan revaluation would ease if the US currency secured a strong rebound in global markets. The tightening of monetary policy in the US should help alleviate downward pressure on the US currency to some extent, but the dollar appears unlikely to secure a significant gains against Asian currencies.

Dangers in currency float

There will still be heavy opposition to a free float and this would not be a sensible policy move. The Chinese economy would find it difficult to manage the financial pressures and economic stability would be a high risk. The authorities are, therefore, left with the possibilities of a new peg at a stronger rate against the dollar, a wider trading band or a switch to a trade-weighted basket. There would also be the potential for combining a wider band with a trade-weighted basket.

There are clear dangers in a gradualist approach as there could be an increase in speculative inflows on expectations of a further widening. These fears will increase the attractiveness of resisting a near-term policy change.

What would be the implications?

Markets have been speculating over a yuan policy change for months and a limited move to widen the trading band could, therefore, have limited implications, although it would be dangerous to be complacent over the risks of volatility. Sharp upward appreciation on regional currencies could also be avoided initially, but the underlying pressures would be likely to continue. There would be pressure for a Malaysian ringgit policy change away from a fixed peg and the Japanese yen would also be likely to appreciate. Yen gains through 100 against the dollar would be likely to result in some protests from the Bank of Japan.

What are the alternatives?

China could decide to impose tariffs on exports and this would help alleviate the protectionist pressure that has built up over the past few months. The US, for example, is threatening to introduce tariffs on all US imports of Chinese goods unless the authorities let the yuan float higher. Export tariffs would help ease the US political pressure, but the Chinese authorities will find it increasingly difficult to control trade in this fashion.

The authorities could decide to do nothing, but the economic and political pressures are likely to intensify unless there is a strong and sustained rebound in the US currency, a decline in the trade deficit and a cooling of the Chinese economy. There could be a large one-off yuan revaluation, but this would be likely to destabilise the industrial sector and this is likely to be resisted.

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 11 December 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 12 Dec
09:30 GB- CPI
10:00 GB- ZEW Survey
13:30 US- PPI
Wed 13 Dec
00:30 AU- Employment
09:30 GB- Unemployment
13:30 US- CPI
15:30 US- EIA Crude
19:00 US- Fed Decision
Thu 14 Dec
07:30 CH- SNB Decision
All Day- Global- flash PMIs
12:00 GB- Bank of England Decision
12:45 EZ- ECB Decision
13:30 US- Retail Sales
13:30 US- Weekly Jobless
14:45 US- Industrial Production

Forex Trading Outlook


Potential Trading Opportunities

  • POTENTIAL PRICE RISK: Mediun Tue--10:00 GMT-- DE- ZEW. Second Tier Sentiment Survey
  • POTENTIAL PRICE RISK: HIGH-Medium Tue--13:30 GMT-- US- PPI

  • POTENTIAL PRICE RISK: HIGH-Medium Wed--09:30 GMT-- GB- Employment
  • POTENTIAL PRICE RISK: HIGH Wed--13:30 GMT-- US- CPI
  • POTENTIAL PRICE RISK: Medium Wed--15:30 GMT-- US- EIA Crude
  • POTENTIAL PRICE RISK: High Wed--19:00 GMT-- US- Fed Decision


  • POTENTIAL PRICE RISK: HIGH- Thu --00:30 GMT-- AU- Employment
  • POTENTIAL PRICE RISK: Medium- Thu --All day-- global- flash PMIs
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --07:30-- CH- Swiss National Bank Decision
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --09:30-- GB- Retail Sales
John M. Bland, MBA
co-founding Partner, Global-View.com EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105