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Spike in Yuan Forwards As China Brightens

March 12th, 2010 | No Comments | Posted in Currency

China has proven to be a major players on the global economic scene, some how managing to avoid the brunt of the global economic woes and many economists are predicting that the Asian giant is on track to even greater power. Yuan forwards have experienced a jump due to speculation that the United States’ decision to wait on releasing a report about its policies on global foreign exchange may create conditions where China is more willing to allow its currency to appreciate further. Should this be the case, investors in the yuan can expect to profit handsomely and this is increasing demand for the yuan. The jump comes after news that Timothy F Geithner, US Treasury Secretary, announced the US will postpone its April 15 deadline for an annual review of the national foreign exchange policy. The official has said that the coming months will prove ‘critical’ to bringing changes the US sees as needed to bring about a more balanced global economy.

The reason this announcement is significant is because in the game of pseudo Cold World politics that the US and China play out with each other on the international stage, this move is viewed by analysts to be a subtle gesture intended to allow China extra time to bring its currency to a more suitable level the US wants. Instead of making an aggressive announcement, the subtlety is expected to decrease pressure and create cooperation for a mutually beneficial agreement on currency levels. Shanghai reported an advance of half a per cent on its 12 month non deliverable forwards to 6.6160 per dollar, a significant gain that has traders excited.