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The Chinese Yuan drops on the foreign exchange market

The Chinese Yuan drops on the foreign exchange market

China has dominated the foreign exchange market for almost a decade and yet in the past week we have seen China dip into their currency reserves to support the Yuan. For the first time since the financial crisis of 2008-2009, we have seen Japan overtake China’s currency holdings.

  

“In the first 11 months of 2016, official figures show that foreign currency bank deposits owned by Chinese households rose by almost 32 percent, propelled by the Yuan's recent fall to eight-year lows against the dollar.” – By Winni Zhou and John Ruwitch (Reuters)

 

Earlier this year in October we saw China’s foreign exchange reserves also take a hit with the lowest in five years. Marking the inauguration of Donald Trump, the fall was largely due to the US dollar’s strength on the foreign exchange market.

 

“According to the figures released by Washington on Thursday, Beijing held $1.12 trillion in US government bonds, notes, and bills in October, down $41.3 billion from the previous month. That is the lowest investment since July 2010.” – RT News Publication

 

Reports have shown that China has been selling US Dollar to level out the Yuan, accepting the risk of depreciating the Yuan.

 

What does this mean for your money transfer?

 

With the Yuan now taking a back drop from being the leader on foreign exchange market, you can expect to get far less on each GBP or USD for each Yuan. You can also expect to see that foreign exchange brokers will take a bigger spread on the currency conversion. This will be due to the loss in confidence, mitigating the risks in buying/selling the currency.

 

You can also expect an influx in your transaction fee as admin charges may be applied when trading on the Yuan corridor.

 

For more information, make sure to login into your OneAccount to check the latest rates and exchange rate margins.


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