Stronger Yuan to boost commodities and hurt imports
The decision from China to allow their currency more flexibility is positive on a global and macro-economical scale since it brings the Yuan “into the game”.
“In view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China, the People´s Bank of China has decided to proceed further with reform of the RMB exchange rate regime and to enhance the RMB (renminbi) exchange rate flexibility.”
Above quoted from The official press release.
Without a doubt, the Chinese currency is set to strengthen. We should expect the immediate effects of this to be higher pricing on commodity markets, specially base materials. At the same time, US imports from China heve never been bigger than they are now, and will presumably continue to rise which will have a substantial effect on profits for US retail and parts assembly businesses.
Those who know their Forex trades may look forward to a time of plenty.
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