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Is China doing its Part?

This week, China widened the Yuan’s trading band outright to +1% above or below the central parity rate (the PBoC fix before trading). Previously they had been using +0.5%. Against the EUR, GBP and JPY, the float is up to +/-3%. Optically, it is another step in the liberalization of the CNY exchange rate towards full convertibility. Fundamentally, it will take some of the pressure off China on allowing more CNY appreciation. It is supposed to be a well-timed political move that proves that reformists are in charge and continue to push forward key financial reforms. Currency flexibility can only be positive for “equities by making it easier for policy makers to balance growth and inflation.” Analysts expect the pace of CNY appreciation is going to be dictated by the USDCNY fix. So far this year, the fix has lagged behind the 5% down trend in 2011.

Below are some other highlights of the week:


ASIA

 

AMERICAS Week in FX [1]

EUROPE Week in FX [2]

 

WEEK AHEAD

  • Week starts with CNY flash PMI and Aussie CPI and PPI
  • CAD quiet with Core retail sales
  • USD, JPY and the Kiwi’s bring us CBank rate announcements
  • New and Pending Home sales are delivered to us from the US
  • GBP gives us preliminary GDP while the US advance
  • In mid-week we get to see consumer confidence in the US

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell [7]

Vice-President of Market Analysis at MarketPulse [8]
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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