Chinese Yuan Set for a Big Day
The International Monetary Fund is expected to announce that the Chinese yuan will be added to the reserve fund. Only four other currencies are currently in this group: the U.S. dollar, the euro, the Japanese yen, and the British pound sterling. This announcement is likely to spur a buying of the yuan, but whether or not this will be done in relation to the big four currencies is not yet clear.
However, an immediate positioning of the yuan against weaker currencies, especially those with lower volumes traded, could be a profitable short term venture, especially if they are timed correctly with binary options. There will still be the normal oscillation that is present in any asset’s price chart, but the overall trend of the yuan is likely to change, and that will give traders a much higher likelihood of success when these two concepts are both taken into account. A clear trend, backed by strong fundamentals, can be a powerful tool in any currency traders—whether Forex or binary options—bag of tricks. From here it just becomes a matter of good market timing.
This move is not unexpected by the IMF. China’s economy is the second largest in the world behind that of the U.S.’s, and earlier in November, the head of the IMF publicly backed China’s request. Now it’s just a matter of formalities.
The other thing that this could provoke is moving the yuan from a secondary currency, to one of the major ones. The big four may become known as the big five, if the yuan can grow stronger. With the intense weakness that the Chinese stock markets have seen over the last several months, the yuan is already strongly positioned as weak economies can boost the value of a currency. China’s situation is very different from that of other major economic powers, though, so this may not happen. Still, it is a good situation for the yuan to be in, and the timing of this announcement may be what’s needed to help the Chinese economy turn around. Experts believe that if this decision is made, the yuan could join the U.S. dollar and the euro as one of the three most highly sought after currencies in the world by the year 2030.
An announcement like this always brings forth a lot of doomsayers speculating that it will position China to take over the world’s economy. Talk like this is fruitless and negative. What a majorly backed Chinese currency will do for sure is to help China’s social infrastructure move into the 21st century and allow more Chinese citizens to have a higher quality of life. The immediate impact on business will only be slight, but it will help in the long run. Again, major changes are not expected to be seen for about ten to fifteen years, and that’s a long time for things to change. Short term spot traders should be looking for the immediate psychological reaction to what occurs, and not worry so much about the long term fundamental changes. By getting a gauge on how others will react, especially big money institutions that will now want to accumulate as much of the yuan as they can to keep themselves internationally relevant, traders can reap the profits that come from kneejerk reactions to big news items, and this is certainly a big news event. However, the impact will be likely to be a short lived one, and the immediate excitement will fizzle out over the next week or so. Getting a jump on things like this with accurate predictions based upon highly probable events is the key.