Yuan to Trade Openly vs. Loonie and Aussie

foreign exchangeIn another move designed to open up its currency the China Foreign Exchange Trade System (CFETS) confirmed a Reuters report on Thursday that they would be introducing the Yuan to trade vs. the Canadian and Australian dollars starting Monday November 28th.

This comes on the heels of the details concerning the contracts to be available on the Pan Asian Gold Exchange (PAGE) where Gold will be available to trade directly in Yuan.  Once PAGE opens it will give traders the opportunity to value the Yuan in terms of the three ‘hardest’ currencies in the world, as the Loonie and Aussie trade in sympathy with the commodity indexes due to their strong mining and natural resource sectors.  Gold, of course, is the only currency to trade without counter-party risk.  In a world where the headlines are dominated by terms like ‘sovereign debt crisis’ and ‘CDS spreads widening’ the allure of investments devoid of the worry of someone else’s lack of liquidity and a fundamental lack of leverage is a lot stronger than it was just five years ago.

These moves by China underscore what has been seen as a long-term plan to secure access to resources for the future especially given the strength of their trade relationships with Canada and Australia.

Currently the yuan trades in Shanghai versus the Euro, U.S. dollar, British Pound, Japanese Yen, Hong Kong dollar, the Russian Rouble and the Malaysian Ringgit.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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