Forex

The Current Position of the Yuan

Published

7 years ago

March 14, 2017

The Current Position of the Yuan

Investors across the globe have been keeping an eye on the Yuan owing to the tumultuous performance it has had in the past few years.

The Chinese currency has been on a downward trend, which has affected forex trading on various fronts. Being a big player in the global forex market, traders must gain a better understanding of the state of the Yuan and its outlook before trading on an online platform like CMC Markets. The latest news on the Asian currency is that the government may seek a new approach to maintain the stability of the currency.

A Different Stance

Speaking on Sunday, 5th March 2017 at the National People’s Congress, China’s Premier Li Keqiang said that the plan was to liberalise the renminbi exchange rate further. Keqiang was presenting the government work report, which included ‘maintaining the Yuan’s stable position in the world’s monetary system’ as one of its tasks. It is the first time a government report has contained this statement, which is different from the traditional ‘keeping the Yuan’s level reasonable and balanced’. Analysts speculate that this new wording in the report indicates that the Chinese government will be more open-minded about the Yuan’s move against the U.S dollar, not to mention a decrease in its involvement in the forex exchange market.

Causes for Concern

There have been indications that Beijing may take a different approach to its exchange rate policies in light of the rapid rate rise from the U.S. Fed Reserve. Any aggressive action from the Federal Reserve is expected to impact global currencies negatively, and the Yuan is in no position to deal with uncertainties at the moment. A second rate hike may not be too far away, following a statement by Fed Chair, Janet Yellen in mid-February that an interest hike should not take too long. She hinted that a rate increase might be appropriate when the Fed has its next meeting on March 14-15.

An increase U.S dollar value will put the renminbi under tremendous pressure. Compared to a few years ago, the Yuan is more dependent on the performance of the dollar; hence, the concern. U.S. and China interest differentials can cause capital flights, which is why the Chinese central bank has to act decisively. So far, the PBOC has not altered the benchmark interest rates or deposit reserve ratios for Chinese banks as it aims to keep monetary policy even- not too loose and not too tight.

Beijing is also worried about threats from President Trump to institute more protectionist measures, which are bound to result in trade wars between the two global market leaders. Political uncertainties in Europe as France, Germany and Holland head to elections are also huge concerns for Beijing. The possibility of ‘Black Swan’ results can have unfavourable consequences for China and other Asian markets. Not to forget the exit of Britain from the EU, which may not be smooth sailing.

The Future

There have been accusations from the U.S president that Beijing has been manipulating the Yuan. He claimed that the manipulation was aimed at increasing the competitiveness of Chinese exports. China has been trying to prop up the renminbi, which has not been easy. In 2 ½ years, the government dipped into its foreign exchange reserves to a tune of $1 trillion in an effort to strengthen the Yuan.

Financial experts such as Yu Yongding, a former adviser to the central bank, have been urging the government to let the currency devalue if the market wants it to. Vice-governor of the Chinese central bank, however, said that the government would never devalue the Yuan to promote exports. He added that China is responsible and will never stage a currency war.

During Sunday’s National People Congress, Keqiang stated that the government was aiming at a 6.5% economic growth for the year. In 2016, the rate of increase was 6.7%, higher than the targeted 6.5-7%. An improvement in China’s economic growth means good news for the Yuan; and consequently, for investors. Investors have come to view the Chinese currency as less appealing as its international status keeps falling.

The Chinese government is also focusing on keeping the Yuan stable as the country goes through a leadership transition later in the year. The latest government report also insisted that monetary policy will remain ‘neutral and prudent’. Investors only have to wait and see how the new approach to the stabilisation of the Yuan works out.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Naira Hits Eight-Month High at 1,120/$ Amidst Central Bank Reforms

Published

4 days ago

April 11, 2024

Samed Olukoya

The Nigerian Naira has surged to an eight-month high of 1,120 against the US dollar on the parallel market, commonly referred to as the black market.

This significant appreciation comes on the heels of a series of foreign exchange (FX) reforms initiated by the Central Bank of Nigeria (CBN), which have effectively unlocked dollar liquidity within the economy.

According to data compiled from online platforms and street traders, the current exchange rate reflects a gain of 62.95% for the Naira against the dollar compared to its level of 1,825 per dollar in February 2024.

Market sentiment suggests that the recent strengthening of the Naira can be attributed to a subdued demand for the US dollar, coupled with ample liquidity in the market, particularly during the holiday period.

Despite a decline in external reserves, Nigeria’s currency strengthened to 1,230.61 per dollar on the official FX market before the holidays.

The recent uptick in the Naira’s value follows the CBN’s decision to review the exchange rate for Bureau De Change (BDC) Operators to 1,101 per dollar from 1,251 per dollar.

Also, the CBN announced plans to sell $15.88 million to 1,588 eligible BDCs, further bolstering dollar liquidity in the market.

The CBN’s proactive approach to FX management, including the resolution of foreign exchange backlogs amounting to US$7 billion, has instilled confidence among investors and market participants.

Furthermore, the apex bank’s commitment to implementing reforms aimed at enhancing transparency and efficiency in the FX market has yielded positive results.

Forex

Zimbabwe’s Gold-Backed Currency Surges 0.2% Against US Dollar

Published

6 days ago

April 10, 2024

Samed Olukoya

Zimbabwe’s newly introduced gold-backed currency, known as ZiG, surged by 0.2% against the US dollar on its second day of trading.

This development has sparked both cautious optimism and renewed concerns about the nation’s financial stability.

The Reserve Bank of Zimbabwe reported that the exchange rate for ZiG strengthened to 13.53 per US dollar, compared to its initial rate of 13.56 per dollar on its debut trading day.

The slight but significant uptick in value comes as a welcome sign for Zimbabwean authorities who have been striving to establish a functional local currency amid persistent economic challenges.

The ZiG currency, introduced as the country’s sixth attempt to stabilize its monetary system, is backed by 2,522 kilograms of gold and approximately $100 million in foreign currency reserves held by the central bank.

This gold backing is seen as a crucial step to restore confidence in Zimbabwe’s currency after years of hyperinflation and currency instability.

Despite the positive momentum witnessed in the currency market, the transition to ZiG has not been without its hurdles. Banks, retailers, and utilities across the nation have been grappling with the logistical challenges of adopting the new currency, leading to disruptions in commerce nationwide.

Many businesses are still in the process of updating their systems to accommodate ZiG transactions, causing delays and confusion in payment processing.

The Zimbabwean government has set a deadline of April 12 for businesses to fully transition their electronic systems to ZiG.

However, reports indicate that only a third of the financial institutions linked to the national payments platform have been able to process ZiG payments effectively, highlighting the ongoing challenges facing the currency transition.

While the surge in ZiG’s value against the US dollar offers a glimmer of hope for Zimbabwe’s economic prospects, experts caution that sustained stability will depend on factors beyond short-term fluctuations.

Market confidence, effective monetary policies, and structural reforms will all play crucial roles in determining the long-term viability of the ZiG currency and the broader economic recovery efforts in Zimbabwe.

Naira

Dollar to Naira Black Market Today, April 9th, 2024

As of April 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

7 days ago

April 9, 2024

Samed Olukoya

As of April 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,240 and sell it at N1,230 on Monday, April 9th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.