Monday saw the central parity rate of the Chinese Yuan versus the U.S. Dollar hit a six-year low of 6.769 Renminbi per Dollar, as the U.S. currency strengthened on increased expectations of an interest rate hike.
Traders said the Asian currency established around 6.77 after a massive sale of U.S. Dollars by state-owned banks. Two versions seemed to be circulating: one group said banks were selling Dollars to help stabilize the Yuan, while another group argued that “big banks trade on their own behalf,” a Fortune article read.
"The dollar demand was very strong today. And dollar purchases by individual residents also went up today," one traded added.
However, most analysts believe the volatility is temporary, and the likeliness of a sharp devaluation, quite low.
In fact, a look at the recent history of the Chinese currency reveals that its exchange rate against the U.S. Dollar has been quite range bound since mid-2008, with $1.00 equating to $6.00-$6.90 CNY.
Chinese Yuan ETF WisdomTree Dreyfus Chinese Yuan Fd (ETF) CYB was slightly up on Monday trading. Other ETFs like the Guggenheim CurrencyShares Chinese Renminbi Trust FXCH and Market Vectors Chinese Renminbi/USD ETN CNY were unchanged.
The Chinese Yuan closed at 6.7766 on Monday trading. Interestingly, the slip in the Chinese currency seems to have pushed the BitCoin to three-month highs as investors looked for a save haven.
Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.
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