CNY value decrease aimed at speculator counter-attacks

Friday 28 February 2014 00:23 CET | News

The Chinese authorities deliberately decreased the CNY market value on the 28th of February 2014 in order to counter attack the wave of speculators who bet on the Chinese currency as a winning ticket.

This last currency decrease represents the ninth decline in a row for a currency that is tightly controlled by the central bank and has seldom been off track from a steady appreciation.

The steady increase of the CNY market value in recent years turned the investors’ attention to the Chinese currency, and has been perceived as rock solid investment. Since 2010, CNY has gained about 10% in market value.

CNY’s sudden shift from the rising path, decreasing 1.6% against the USD, starting from the 20th of February,made waves of concerns among the investors. The 0.4% drop on the 28th of February was particularly steep. One USD now buys CNY 6.15 compared with CNY 6.04 in late January 2014. Analysts say the Peoples Bank of China is behind the reversal.

The central banks strategy is likely designed to put the squeeze on hot money, meaning cash drawn in from foreign markets where interest rates are low, and invested in Chinese assets in the hope of much higher returns. It also said that two-way movements in the CNY would become the norm, in part due to an enhanced role for the market.

China’s national currency, namely CNY, has surpassed the CHF and thus has become the seventh most-used currency for payments worldwide, according to online media outlet Global Post.

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Keywords: China, CNY, currency value decrease, speculation, market value, hot money
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce