Effect of Yuan RMB peg to the dollar

[rod_falcon]

Some commentators suggest that Chinese intervention in the currency markets to stop RMB from appreciating against USD is driving the dollar down. I don't get it, I think exactly the opposite would happen since they are going long USD and short RMB.

Please can anyone explain?

 

[Jason Rogers]

Some commentators suggest that Chinese intervention in the currency markets to stop RMB from appreciating against USD is driving the dollar down. I don't get it, I think exactly the opposite would happen since they are going long USD and short RMB.

Please can anyone explain?

You will hear export driven countries complaining that China's intervention is distorting the market. Their currencies are gaining in value versus the dollar making their exports less competitive while the Yuan maintains it's weakness (due to intervention) which makes Chinese exports more competitive versus its neighbors.

 

[N Rothschild]

Some commentators suggest that Chinese intervention in the currency markets to stop RMB from appreciating against USD is driving the dollar down. I don't get it, I think exactly the opposite would happen since they are going long USD and short RMB.

Please can anyone explain?

you mean driving the dollar up, not down.

 

[elitejets]

Yes but they buy USD and then diversify their holdings into other currencies and commodities, particularly EUR ... hence EURUSD (amongst other products) is well bid.

 

[N Rothschild]

umm have you looked at a eur chart today elitetits lol

 

[elitejets]

have you looked at the trend?

 

[N Rothschild]

 

[elitejets]

Lol