Welcome!

News Feed Item

FXPRIMUS Market Brief of the Week: Widening Yuan's Trading Band Does Not Make a Difference

SINGAPORE, SINGAPORE -- (Marketwired) -- 03/18/14 -- In FXPRIMUS' Market Brief of The Week for 17 March, the brokerage firm's Senior Economist, Jimmy Zhu, looks at China's effort to revive the Yuan.

Economic Insights

The People's Bank of China (PBOC) Widened Yuan's Daily Trading Band from 1% to 2%

China's central bank widened Yuan's trading band against the Greenback, a move that signaled its process in the reform agenda. The PBOC announced that Yuan's daily trading band against Dollar would be widened to 2%, up from the earlier 1% effective today.

A wider trading band promises to introduce greater volatility into an exchange rate where movements have been modest when compared to other major currencies. The focus is to discourage one-way bets on Yuan's appreciation, which was previously one of the safest bets in major currency markets. The "wish" is that a market price for a key macro-economic variable will encourage greater efficiency. From the chart below, we can see that the USDCNY 1-month vols surged since February this year, when Yuan suddenly encountered a sharp selling off.

USDCNY 1-month vols (white) vs. USDCNY (yellow)

To view the figure accompanying this press release, please visit the following link:

http://media3.marketwire.com/docs/933957.jpg

By reducing the value of currency and interest rates, it also helps to trim shadow banking activities. Two-way fluctuations could unwind speculative inflow positions and give the central bank greater scope to set an independent monetary policy. One of the main reasons for the PBOC to engineer exchange rate lower is to decelerate shadow finance activities and keep its financial market stable for a longer period of time. Lots of the hot money is purely betting the RMB's one way move. Once this perception is eliminated, the amount of the inflow will be trimmed substantially. Lower rates will also push those wealth management products' (WMP) yield lower. Numbers of Alibaba's Yuebao accounts reached 81 million, much higher than the numbers of the A share account holders at 67 million. With the benchmark interest rates moved lower, Yuebao's annual yield dropped below 6% this week, reducing its popularity. Some of the supply will also be cut from here.

But, the key issue here is: will that make any significant differences? From our point of view, we do not think it will. PBOC said exactly the same thing in April 2012 when it last doubled Yuan's trading band. But volatilities did not move higher, instead they gradually edged lower.

USDCNY volatilities in 2012 & 2013

To view the second figure accompanying this press release, please visit the following link:

http://media3.marketwire.com/docs/933957A.jpg

Other major currencies were trading without constraints, such as the Euro. They rarely rise or fall by more than 1% against the Dollar in a day, or less than 5% in a year. So, China's widening of the RMB's daily range to 2%is a very symbolic move. Let us be realistic, the Yuan's value remains in the hands of policy makers.

The PBOC may lower the bank's reserve requirement ratio in order to boost lending and revive economic growth. The economy may need some support if it is going to meet the government's 7.5% expansion target due to the Yuan's record of 1.3% YTD fall, a declining Purchasing Managers' Index (PMI) and an 18% plunge in exports last month. Lowering reserve requirement ratio is one of the few policy options that the central bank has left amid liberalisation of interest rates.

Top News This Week

German ZEW Economic Sentiment
I expect figures to come in at 52.5%

New Zealand GDP QoQ
I expect figures to come in at 1.2%

ABOUT FXPRIMUS

FXPRIMUS offers retail traders a level of trade execution, service quality and fund safety that are normally reserved only for the largest investors. Serving traders in 205 countries across 6 continents FXPRIMUS combines an unmatched level of fund safety with regular independent audits of company financials and Straight Through Processing, top notch execution with tight spreads, prompt and responsive customer support, ISO 27001 certification in Information Security, ISO 9001:2008 certification in Quality Management and an industry-leading trader toolset that includes free access to powerful trader tools. FXPRIMUS truly is The Safest Place To Trade.

Add to Digg Bookmark with del.icio.us Add to Newsvine

Contacts:
FXPRIMUS Support
[email protected]

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
With more than 30 Kubernetes solutions in the marketplace, it's tempting to think Kubernetes and the vendor ecosystem has solved the problem of operationalizing containers at scale or of automatically managing the elasticity of the underlying infrastructure that these solutions need to be truly scalable. Far from it. There are at least six major pain points that companies experience when they try to deploy and run Kubernetes in their complex environments. In this presentation, the speaker will d...
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
The deluge of IoT sensor data collected from connected devices and the powerful AI required to make that data actionable are giving rise to a hybrid ecosystem in which cloud, on-prem and edge processes become interweaved. Attendees will learn how emerging composable infrastructure solutions deliver the adaptive architecture needed to manage this new data reality. Machine learning algorithms can better anticipate data storms and automate resources to support surges, including fully scalable GPU-c...
When building large, cloud-based applications that operate at a high scale, it's important to maintain a high availability and resilience to failures. In order to do that, you must be tolerant of failures, even in light of failures in other areas of your application. "Fly two mistakes high" is an old adage in the radio control airplane hobby. It means, fly high enough so that if you make a mistake, you can continue flying with room to still make mistakes. In his session at 18th Cloud Expo, Le...
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
As Cybric's Chief Technology Officer, Mike D. Kail is responsible for the strategic vision and technical direction of the platform. Prior to founding Cybric, Mike was Yahoo's CIO and SVP of Infrastructure, where he led the IT and Data Center functions for the company. He has more than 24 years of IT Operations experience with a focus on highly-scalable architectures.
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
CI/CD is conceptually straightforward, yet often technically intricate to implement since it requires time and opportunities to develop intimate understanding on not only DevOps processes and operations, but likely product integrations with multiple platforms. This session intends to bridge the gap by offering an intense learning experience while witnessing the processes and operations to build from zero to a simple, yet functional CI/CD pipeline integrated with Jenkins, Github, Docker and Azure...
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
Dhiraj Sehgal works in Delphix's product and solution organization. His focus has been DevOps, DataOps, private cloud and datacenters customers, technologies and products. He has wealth of experience in cloud focused and virtualized technologies ranging from compute, networking to storage. He has spoken at Cloud Expo for last 3 years now in New York and Santa Clara.
Enterprises are striving to become digital businesses for differentiated innovation and customer-centricity. Traditionally, they focused on digitizing processes and paper workflow. To be a disruptor and compete against new players, they need to gain insight into business data and innovate at scale. Cloud and cognitive technologies can help them leverage hidden data in SAP/ERP systems to fuel their businesses to accelerate digital transformation success.
Containers and Kubernetes allow for code portability across on-premise VMs, bare metal, or multiple cloud provider environments. Yet, despite this portability promise, developers may include configuration and application definitions that constrain or even eliminate application portability. In this session we'll describe best practices for "configuration as code" in a Kubernetes environment. We will demonstrate how a properly constructed containerized app can be deployed to both Amazon and Azure ...
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.