We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • What is #forex risk management? As a trader why is it important to know the basics of it? https://t.co/M9R46rmPUK #tradingstyle https://t.co/C34oD6U8in
  • EUR/GBP has plummeted to a 19-month low while GBP/CAD and GBP/USD are re-testing critical resistance channels. $GBPAUD has reached a three-year high but will upside momentum last? Get your market update from @ZabelinDimitri here:https://t.co/TqzxCRSnjN https://t.co/voYGKUwE8g
  • RT @ReformedBroker: “The digital yuan China is planning is in fact a complete inversion of the bitcoin model. All of the data created would…
  • The $CAD rose on a hopeful tone from the Bank of Canada, but the largest risk to the central bank’s outlook remains unresolved. NZD/CAD has rallied. Will AUD/CAD follow as CAD/JPY sinks? Get your market update from @ddubrovskyFX here: https://t.co/AairskIHA5 https://t.co/f53ZzloW4u
  • The latest UK General Election opinion polls continue to show the Conservative Party holding a strong lead over Labour and point to Boris Johnson winning a working majority in Parliament. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/qF04EOUWkI https://t.co/LNl4bXbnpp
  • Recent polls have put Conservatives ahead of Labour and given a boost to $GBP. Get your #Brexit update from @ZabelinDimitri here: https://t.co/l2n53C0cYY https://t.co/oTWfXkaDDt
  • What are the truths and myths of #forex trading? Find out from @DailyFX analysts here: https://t.co/uF75VPzstr #FOMOintrading https://t.co/xeromAGqqx
  • Macro data from around the world have long attested to the urgent need for a trade settlement between the US and China. Increasingly the corporate numbers are saying the same. Get your market update from @DavidCottleFX here:https://t.co/Qon7QUO80c https://t.co/rCOG78QQ2M
  • #Gold prices may fall while the US Dollar gains even as economic policies championed by the Trump administration invite inflation. Get your market update from @IlyaSpivak here: https://t.co/4lHhHsby56 $XAUUSD https://t.co/JmZxckVHdS
  • Cable (GBP/USD) remains just off its seven-month high print around 1.3165 as traders start to move to the side lines ahead of next Thursday’s General Election vote. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/CpCh13J9ZH #Brexit https://t.co/PIh6WUqbsK
China Reopens after Holiday Week, How Will the Yuan Respond?

China Reopens after Holiday Week, How Will the Yuan Respond?

2016-02-13 01:22:00
Renee Mu, Currency Analyst
Share:
China Reopens after Holiday Week, How Will the Yuan Respond?China Reopens after Holiday Week, How Will the Yuan Respond?

Fundamental Forecast for the Yuan: Neutral

The offshore Yuan (CNH) rose to the highest level in two months against the US Dollar this week thanks to a smaller-than-expected drop in China’s foreign reserves combined with Chair Yellen’s testimony saying that negative rates are not out of the question for the US economy. The rally in the Japanese Yen over the past two weeks has also helped to reduce pressure on the Yuan, despite of Bank of Japan’s negative interest rate policy. On the coming Monday, China’s onshore equity and foreign exchange markets will reopen. China’s central bank will guide the onshore Yuan by issuing the daily reference rate again. Also, key Chinese data will be released including trade balance, CPI and PPI figures over the next week. All these factors will likely bring volatility to a global market that is already bursting at the seams with volatility.

We have discussed in the previous weeks that the regulator’s controls of exchange rates are highly related to the performance of Chinese equity markets. After the global stocks began to face turbulence being driven by risk aversion, the outlook on Chinese stocks has become even uncertain. Specifically, Hong Kong’s Hang Seng Index dropped 3.85% after the market reopened following the Lunar New Year earlier this week. Unlike the full-week holiday in mainland China, Hong Kong has three days off for the New Year so markets in HK re-opened earlier. Its performance can be seen as a leading indicator for the mainland market as the two share a close relationship; historical data shows that their indexes move along similar trends, especially over the past six months.

Moreover, Shanghai-Hong Kong Stock Connect program directly links the two markets. The channel could potentially transfer the turmoil from Hong Kong to mainland China. Under such a turbulent environment, combined with the Chinese stock market’s own plunges in January, Monday’s reopening may bring in heavy volatility to Chinese stocks. From regulator’s point of view, relatively stable Yuan rates can help to maintain market confidence. Thus, the first reference rate after the 7-day holiday is likely to be set stronger, which would be consistent with Yuan-moves over the past week and could continue to reduce Yuan short speculation.

In terms of event risk, China’s trade figures including January trade balance will be announced on Monday. The trade balance is expected to increase to $60.90 billion in January from $60.09 billion in previous month. If the trade readings come in better-than-expected, they will support the Yuan to move higher. On Wednesday, China’s January CPI and PPI ratios will be published. Investors will want to keep an eye on these data points as well, as it can help to highlight how aggressively slowdown is hitting in the Chinese economy.

Another theme related to Yuan moves is from the neighboring Central Bank in Japan. The recent rally in the Japanese Yen has helped to ease pressure on the Yuan, but this goes directly against BoJ’s goal. Thus, Japan may take additional actions to intervene the market, and this could certainly impact the Chinese currency as well.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.