China increasing Forex investments to keep the Yuan in check
China increasing Forex investments explained by professional Forex trading experts the “China increasing Forex investments” FX trading team.
China increasing Forex investments?
One of they key themes we’ve been following lately has been China relaxing its rules governing Forex movements and trading, which has been a key catalyst behind the rapid growth of retail FX trading among Chinese retail FX traders. (We even posited that one of the key reasons for FXCM’s attempt to buy Gain Capital was Gain’s strong market position in China FX.
What we haven’t addressed though is… why? Why are Chinese authorities allowing the Yuan to trade in a wider band, and making it easier to move foreign currency into and out of the country?
The answer is simple — the Chinese government has a never-ending thirst for foreign currency. To keep Chinese factories humming and competitive the Chinese government must keep the Yuan from rising too fast. They do that by constantly buying foreign currency (thereby selling / dumping Yuan) in massive amounts — mainly US dollars, but more recently also Euros and Yen. Relaxing the rules is necessary for bringing more and more foreign currency into the country — and as a ‘side effect’ it has expectedly made the Yuan more interesting to trade.
China increasing Forex investments Conclusion
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