Is now the right time to trade the Chinese yuan

Ashraf Laidi outlines why now could be the ideal time to trade the Chinese yuan….

As China takes fresh steps to allow its currency to move more freely, the Chinese yuan is generating more interest from traders and investors.

Chinese consumer demand, industrial production and inflation have all continued to slow since mid- 2014. Chinese loan demand reached its lowest level since Q4 2009 and inflation hit five-and-a-half-year lows. This forced the Chinese government to downgrade its target for 2015 economic growth to 7% from 7.5% in 2014 – the lowest growth rate in 24 years.

In efforts to support the economy, the People’s Bank of China cut interest rates twice between November 2014 and March 2015, bringing them to four-year lows. This pushed the CNH lower against all major currencies.

Since peaking against the US dollar in January 2014, CNH fell nearly 4% – its biggest decline against USD since China revamped its currency structure in 2005.

As China is anticipated to further lower interest lending/borrowing rates, CNH may fall further against the US dollar, especially if the Federal Reserve is expected to raise rates for the first time since 2006.

And, with the Chinese yuan now available for spread betting and CFDs, you’re no longer limited to the Australian dollar as the only proxy for China.

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