The growth of the yuan parity rate
According to the latest data the central parity rate of yuan in relation to the USD has increased to the point of 6.8203 that turned to be the biggest growth throughout the last seven weeks. As the China’s Foreign Exchange Trade System shows the rate set by the Central bank of the country before the trades was 0.37 percent higher than the Friday’s numbers. However after this the yuan decreased a bit more in relation to the USD. Due to Liu Dongyuan a Shenzhen-based foreign exchange analyst with China Merchants Bank big mid-points set by the Central Bank before the trades usually shows the will of the Central Bank to make yuan exchange rate more stable. But the long lasting decrease of the yuan may lead to the capital outflow from the country.
Central bank has decreased one-year lending rate to the point of 7.2 percent yesterday.
Since the 2005 the Chinese currency has increased by 20 percent in relation to the USD. And all this time some supposed that such growth may lead to the attraction of hot money that will contribute to the increase of bubbles in stock and property markets of the country.
However now there is a real possibility of capital outflow as the growth of the Chinese currency seems to have come to the end and the prices at the local property and share markets go down.
Yesterday the dollar/yuan Non-deliverable forwards with the one-year term reached the highest point of 6.8210. Considering the level of NDFs we can suppose that the Chinese currency will continue to decrease versus the USD throughout the following year.
