Credit: REUTERS/© Kim Kyung Hoon / ReutersAug 26 (Reuters) - China's yuan is rallying, and this rally could last.
Today's yuan is not fully convertible, but the offshore yuan can be traded easily and market depth has reached a level that rivals many major currencies. During this year's turmoil, the yuan has been quite stable, although few investors sought safety in China.
The fewer who are invested in an asset the safer it may be.
With China's economy performing better than much of the competition and the yuan also paying a decent yield, it should attract investors.
It costs to hold all of the other presumed safe currencies and spec bets on the euro, Swiss franc, yen and gold are already large.
Should the yuan draw the attention of central banks -- which it must do if it appreciates significantly -- its share of global reserves should rise and the foundations of this rally will strengthen.
Today, CNH's trade-weighted value hit a more than three-month peak and rose above the 200-day moving average. Short-term techs and momentum currently favour the yuan but this rally could be so much more.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
((jeremy.boulton@thomsonreuters.com))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
