Yuan-Dollar Forwards Tearing Up As Hike Appears Imminent

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Action has picked up in the yuan forward market. According to Bloomberg, 12-month yuan forwards rose to 6.6491 as of 5:30 p.m. in Hong Kong, which represents a 2.7% jump from the current spot rate of 6.8256.

Sure we’ve had some pretty strong rebound indications out of the U.S. lately, and the stronger the global rebound looks, the easier it would be for China to hike its yuan-dollar rate. 

So strong economic data could be one reason for the excitement.

Or perhaps traders simply got wind of Chinese media rumours:


The Chinese government is reviewing proposals to adjust its currency exchange rate system next month, Chinese media reported, as international pressure grows on Beijing to revalue the yuan.

The proposals include giving the yuan a more flexible exchange rate by widening the Chinese currency’s narrow daily trading band, the weekly Caijing Magazine reported in its latest issue, citing unnamed sources.

This makes a lot of sense, given that Beijing has already been conducting yuan-hike stress tests on their export industries.

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