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Currencies affected by China's Economy

  • #1
  • First Post: Oct 13, 2014 5:22am Oct 13, 2014 5:22am
Hey guys, I have a quick question for those who are more fundamentally savvy. What currency among the 'Majors' does the Chinese economy directly affect the most? Obviously the American economy directly affects the USD, European economy-EUR, Englands economy-GBP, Canadian economy-CAD, French economy-CHF, Japans economy-JPY, Australian economy-AUD, and finally, New Zealand economy-NZD. These are the so called 'Majors', but China, being arguably, the second largest economy in the world, does not have it's currency, the Renminbi Yuan, listed. So how can we directly take advantage of the effect this economy has on the currency market without having access to trade the Yuan? Anybody?
  • #2
  • Oct 13, 2014 6:57am Oct 13, 2014 6:57am
Australia exports a huge amount of minerals and construction materials to China, so changes in the Chinese economy (particularly growth related figures) have the biggest effect on AUD.
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  • #3
  • Oct 13, 2014 7:38am Oct 13, 2014 7:38am
+1 on AUD. The NZD's correlates with the Yuan as well.
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  • #4
  • Oct 13, 2014 9:14am Oct 13, 2014 9:14am
Quoting numbnuts
Australia exports a huge amount of minerals and construction materials to China, so changes in the Chinese economy (particularly growth related figures) have the biggest effect on AUD.
Tnx numbnuts. from my understanding, an improved chinese economy would imply exports>>imports and probably have an inverse(adverse?) effect on AUD probably(albeit maybe minute). On an interesting note(maybe coincidentally?), AUD is registering as the weakest currency right now on my algos.
  • #5
  • Oct 13, 2014 9:16am Oct 13, 2014 9:16am
Quoting Ryan420
+1 on AUD. The NZD's correlates with the Yuan as well.
Any idea the type of correllaion? Direct? Inverse? Reasons?
  • #6
  • Oct 13, 2014 9:17am Oct 13, 2014 9:17am
Quoting numbnuts
Australia exports a huge amount of minerals and construction materials to China, so changes in the Chinese economy (particularly growth related figures) have the biggest effect on AUD.
...more importantly, why isn't it possible to trade the YUAN directly like other countries currencies???
  • #7
  • Oct 13, 2014 9:25am Oct 13, 2014 9:25am
China is a major trade partner with NZ.

The Chinese central bank (PBoC) limits the trading of their currency to help avoid manipulation by others. They are starting to ease up, setting up direct exchanges recently with the NZD, and widening their trading band to 2%.
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  • #8
  • Oct 13, 2014 9:30am Oct 13, 2014 9:30am
I am a little confused on whether Chinese data on imports or exports or whole trade balance has most effect on, say, AUD? I am thinking better than average rise in imports (as we saw Monday) is beneficial for AUD since that would mean China is purchasing more from a country like Australia. But if imports are greater than exports then trade balance falls or goes into negative, which generally translates into a fall in a currency like AUD. Unless there's something else to this equation.

CAD is another currency that is affected by Chinese data, in similar manner to AUD and NZD - basically all these "commodity dollars".
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  • #9
  • Oct 13, 2014 9:37am Oct 13, 2014 9:37am
Chinese growth = global growth, has been good for stock markets around the world too.
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  • #10
  • Oct 13, 2014 9:46am Oct 13, 2014 9:46am
Quoting san99
I am a little confused on whether Chinese data on imports or exports or whole trade balance has most effect on, say, AUD? I am thinking better than average rise in imports (as we saw Monday) is beneficial for AUD since that would mean China is purchasing more from a country like Australia. But if imports are greater than exports then trade balance falls or goes into negative, which generally translates into a fall in a currency like AUD. Unless there's something else to this equation. CAD is another currency that is affected by Chinese data,...
I agree with you San99. Thats why I said "...an improved chinese economy would imply exports>>imports and probably have an inverse(adverse?) effect on AUD.."
I'm beginning to suspect that paying more attention to how the chinese economy affects other 'majors' will give a good indication of the general global money flow(in addition to the 'almighty' USD of course). I still have no clue to the reason why we can't simply trade the YUAN like the others though.
  • #11
  • Oct 13, 2014 10:01am Oct 13, 2014 10:01am
Quoting LITEchild
{quote} I agree with you San99. Thats why I said "...an improved chinese economy would imply exports>>imports and probably have an inverse(adverse?) effect on AUD.." I'm beginning to suspect that paying more attention to how the chinese economy affects other 'majors' will give a good indication of the general global money flow(in addition to the 'almighty' USD of course). I still have no clue to the reason why we can't simply trade the YUAN like the others though.
From what I understand the CNY is not a fully convertible currency and with capital controls on the currency that precludes its trading. But you can trade CNH, which is CNY rate traded in Hong Kong. I believe FXCM also offers that now.
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  • #12
  • Oct 13, 2014 10:10am Oct 13, 2014 10:10am
Quoting LITEchild
{quote} I agree with you San99. Thats why I said "...an improved chinese economy would imply exports>>imports and probably have an inverse(adverse?) effect on AUD.." I'm beginning to suspect that paying more attention to how the chinese economy affects other 'majors' will give a good indication of the general global money flow(in addition to the 'almighty' USD of course). I still have no clue to the reason why we can't simply trade the YUAN like the others though.
Hey LITEc, I don't know the exact mechanics, but the Yuan/Remnimbi is a controlled currency and not in free-float. I have read in the past that it's pegged to the EUR. Having said that, I can't recall how much dollars China is currently holding onto, not to mention gold reserves. Hence why the inherent fear from the west - if US or Europe screws up its own backyard, China rule the world.

Now behind all that, from what I understand - China have had their own production / housing explosion and they may be facing their own mini-recession. This is what has been affecting Australia/NZ. The have to produce to export but don't forget they are still socialist so will have to import to feed their own people. Likewise, resources for building materials etc etc etc.
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  • #13
  • Oct 13, 2014 10:20am Oct 13, 2014 10:20am
Like san99 said FXCM somehow trades it now:

http://www.fxcm.com/products/chinese-yuan/
  • #14
  • Oct 13, 2014 11:00am Oct 13, 2014 11:00am
Hi LiteChild, I have FXCM account and can in principle trade yuan. Be careful as this is a highly controlled currency artificially kept below its value in order to make export (to the US in particular) more feasible.

k
  • #15
  • Oct 13, 2014 11:01am Oct 13, 2014 11:01am
Quoting vlady1974
{quote} Hey LITEc, I don't know the exact mechanics, but the Yuan/Remnimbi is a controlled currency and not in free-float. I have read in the past that it's pegged to the EUR. Having said that, I can't recall how much dollars China is currently holding onto, not to mention gold reserves. Hence why the inherent fear from the west - if US or Europe screws up its own backyard, China rule the world. Now behind all that, from what I understand - China have had their own production / housing explosion and they may be facing their own mini-recession....
Interesting info Vlad buddy! Me thinks those chinese guys are pretty smart. The west is wise to be afraid. I just read a report that the chinese economy has just about overtaken that of the US!
  • #16
  • Oct 13, 2014 11:09am Oct 13, 2014 11:09am
Quoting kprsa
Hi LiteChild, I have FXCM account and can in principle trade yuan. Be careful as this is a highly controlled currency artificially kept below its value in order to make export (to the US in particular) more feasible. k
This is the key to it. We don't know for sure how they are doing this. How do they offset it? Reserves of what? I don't know enough of the fundies but I also know they are big Debt Holders as well so... I know that the US is "owned" alot by Chinese interests. Stockpiling Oil is perhaps one way the US can protect itself but in my opinion.... assuming everyone being a positive force for good, the only real way to increase economies is to innovate. You can't expand the economies by producing continued chocolate covered shite.... real innovation and invention has to occur to ignite economies, spending and saving.
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  • #17
  • Oct 13, 2014 11:26am Oct 13, 2014 11:26am
Quoting kprsa
Hi LiteChild, I have FXCM account and can in principle trade yuan. Be careful as this is a highly controlled currency artificially kept below its value in order to make export (to the US in particular) more feasible. k
Tnx Varia. Very interesting. Can you post a chart of the USDCNH? I'm curious as to what the price action history looks like. What's the spread on your broker?
  • #18
  • Oct 13, 2014 11:27am Oct 13, 2014 11:27am
Quoting Poocher
Like san99 said FXCM somehow trades it now: http://www.fxcm.com/products/chinese-yuan/
Tnx Poocher.
  • #19
  • Oct 13, 2014 11:27am Oct 13, 2014 11:27am
The PBoC actively intervenes if the currency surpasses +/-2% of their daily fix (9:15pm us-et) by using their foreign currency reserves(usd) or creating Yuan. The central bank can then open their fix the next day, depending on their balance of domestic & foreign ccy. Usd/Cny has highly liquid derivatives that Asian banks use to trade the rate via binary & plain options.
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  • #20
  • Oct 13, 2014 11:28am Oct 13, 2014 11:28am
Quoting Poocher
Like san99 said FXCM somehow trades it now: http://www.fxcm.com/products/chinese-yuan/
There are two versions of Yuan. CNY (onshore) and CNH (offshore). Chineese govt created CNH as a pathway to make CNY free floating in the future. Curently CNH is traded offshore and there is no restriction on who can trade it. the local importer/exporter can convert CNH to CNY 1:1 (with certain conditions) so that is the link between them. but as you can see CNH trades below CNY because it is not fully convertible to CNY.

when trading in CNH increases (it is growing) then china can perhaps make it fully convertible for everyone thus making CNH = CNY.
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