China’s Currency Enters a New Era

By FXEmpire.com

China’s yuanrose to a record against the U.S. dollar today, with the dollar buying 6.284 yuan, a day after Chinese President Hu Jintao told U.S. President Barack Obama that efforts to make the currency more freely tradable would continue.

China’s central bank set midpoint of the daily trading range for the dollar-yuan pair at a record high for the third straight session Tuesday, even as the yuan ended slightly lower against the dollar Monday.

Beijing plans to continue to modernize its currency system, including steps to enable the market to play a greater role in determining its value. China’s economic stumbles worry U.S. investors and speculators, as China could easily intervene in currency trading, which could have negative effects on traders.

The recent statements support earlier Chinese government announcements on plans to free up the nation’s foreign exchange rules and increase the use of the yuan in China’s trade with the world.

The US dollar traded for 6.284 yuan in Shanghai early Tuesday, according to Xinhua news agency. The currency is not yet widely traded, but China is moving quickly to allow global access and develop exchanges around the world.

However, reports showed strength in the Chinese currency had eased slightly by late morning, with the dollar changing hands at 6.3052 yuan, down marginally from its previous close of 6.3069 yuan.

Soon, USD/CNY will become a major currency pair. As investors begin to trust the Chinese government and once the yuan is widely circulated and traded beyond a point that the government will be able to control values except via convention means such as Central Bank decisions. China is entering into a new era.

Originally posted here