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What is the Chinese Renimbi or the Yuan? Is it important? – Classiarius Explains

What is the Chinese Renimbi or the Yuan? Is it important? - Classiarius Explains (Guides)

China’s currency is called the renminbi or the yuan, and it has far reaching impact in financial markets, and this is why it is talked about so much on financial news programs. The official name is the CNY China Yuan Renminbi and is the general term for the currency of the People`s Republic of China or PRC. This currency was introduced by the Communist Party in 1949 and literally means the currency of the people. 

Although this is a floating exchange rate, the Central Bank in China sets a daily exchange rate based on recent prices and allows it to trade against the dollar in a narrow band. So the yuan floats but it is not allowed float completely free and will be adjusted if it breaks out of the band either way. 

Right now, there are trade talks between the US and China and if the talks go well, the yuan will likely trade firm as this local currency firmness indicates a trade solution. However, if the currency suddenly becomes volatile or just suddenly weakens, this will mean the trade talks between the US and China are breaking down. A firm yuan indicates the China wants to make a deal and make concessions to the US and other trading partners for fair trade practices. 

As such, when President Trump and President Xi met in Buenos Aires on December 1. the yuan or renminbi started to settle down and trade firm versus the US dollar. However when it was later learned that talks had been postponed for 90 days and this was not the ideal outcome, the currency started to weaken again. 

We at Classiarius believe that the Chinese currency will weaken, perhaps collapse in the coming weeks as there will be no true and long-term solution to trade. Things will get worse before they get better. 

Team Classiarius 

Classiarius

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Disclaimer: We do not provide investment advice or strategies, this article is not intended as such but only to provide you the reader with information. Please conduct your own research before any investment of any kind.

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