The Yuan reached an all-time high trading against the dollar and appears that it will appreciate 4% for the year 2011 according to traders. The currency will probably continues to appreciate in 2012 as China continues with large trade surpluses and despite American pressure to allow the Yuan to rise in order to balance bilateral trade.
It is presumed that appreciation of the Yuan will slow to approximately 3% next year and will remain relatively stable during the first half of the year. This will provide an opportunity for the Chinese government to examine the impact of the European economic crisis. Then the expected rise in Yuan will come in the second half of 2012.
In order to stabilize the currency, when necessary, the People’s Bank of China (PBOC) has also sold dollars in order to weaken the dollar and strengthen the Yuan.
The PBOC appears to be maintaining the Yuan’s trading range between 6.3 to 6.4 Yuan to the dollar. This rate has remained in effect since early November and is likely to be maintained well into 2012. This provides an opportunity for forex traders to profit within that range. For more information see the Reuters article by Lu Jianxin and Kazunori Takada.
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