Hi, I am analyzing the scenario of a stronger yuan. Its influence on the dollar and PM's. Right now their currency is strongly connected to the dollar. There is this "Chinmerica" phenomenon: interlinking between the US economy and the Chinese economy. A stronger yuan should mean weaker dollar and high gold price. Here are some points: *China announced last year that they're not going to accumulate any more US dollar reserves *they accumulate a lot of gold and some are speculating that China might admit the real amount of gold that they have *obviously, gold is being accumulated as a "protective asset", so they might back something with gold, like the yuan, for instance... *China is struggling to increase internal consumption, which will contribute to higher life standards *China needs a cheaper yuan in order to facilitate exports, but eventually: expenses with cost of production will rise and "the tide will turn", meaning that inevitably the yuan can't be "too cheap for too long" *pretty much the entire Western World + Japan are printing money (I don't have information about China, do you?), so again the yuan seems more advantaged *the Chinese economy has gained strength over the years, which should normally increase the value of the national currency *the Chinese GDP is growing less and less (7.7 % in 2013 means 14 year low) - and they're trying not to be dependent upon exports, which also means the cheaper yuan (for exports) won't be that important to them *more and more countries are using the yuan (let's not forget all those bilateral agreements between China and countries like Australia, Japan etc.), which could gradually push the Chinese currency to a global reserve currency status (and a global reserve currency should be more expensive, shouldn't it?) ...etc. etc. What are your thoughts?
A friend recently attended an investment talk organised by an international bank, for their privileged clients. This event is organised twice every year. For the topic on currencies, the best pair for 2014 is yuan/yen. The yuan is expected to appreciate and the Japanese yen is expected to depreciate. The dollar will appreciate as well but the best spread is yuan/yen. One just need to find a way to take advantage of it.
You are not going to find the right answer on this forum. If you want to be pointed in the right direction then I can only suggest that you read the last 3 or 4 years of Martin Armstrong's writings.... He is the penultimate currencies/economy man...........one of the very few to recognize the inherant flaws in the Euro during the 90's and accurately determined the time that would pass before the cracks appeared.....one of the few to understand why the u.s. dollar is not going to hell in a handbasket just yet...in fact when the u.s. dollar was falling heavily was one of the very few to explain why it is actually going to go to an all time high. Understanding currency comes down to understanding economies, governments including those in government, business cycles etc, etc..............as I said you will get opinions here, some will be right and others will be off with the faeries... but no-one here can guide you to the most likely path the yuan will take and give the real reasons. Armstrong has written quite a bit on the chinese so you will have to take your time and dig up as much as you can....have fun. It is enlightening stuff.
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (in billions of dollars) HOLDINGS 1/ AT END OF PERIOD China, Mainland Jan 2014 1273.5 <- Jan 2013 Reference +5% Dec 2013 1270.0 Nov 2013 1316.7 <- Jan 2013 Reference +8,4% and HIGH Oct 2013 1304.5 Sep 2013 1293.8 Aug 2013 1268.1 Jul 2013 1279.3 Jun 2013 1275.8 May 2013 1297.3 Apr 2013 1290.7 Mar 2013 1270.3 Feb 2013 1251.9 Jan 2013 1214.2 <- Reference and LOW Did you read that announcement on Zerohedge?
The People's Bank of China (PRC's State Reserve Bank) recently widened the trading band on the USD/Yuan rate to about 2% deviation from the reference rate.
The thing is, the whole of worlds currency markets, is a relative story. Values are expressed against eachother. That means that every 'strengthening' of one or more implies a 'weakening' of another or more others, and all the currency planners work together to prevent too much 'strengthening' and 'weakening'. So if one claims that the yuan will gain strength, then the next question is which one(s) will lose strength, and why, with the 'why' being a relative explanation, as in 'US will do better/worser than China because of this/that'. If everybody in the world would simultaneously start to produce twice as much at the same cost, then there won't be any relative change within the currency pool.
