China may have agreed to allow the yuan to appreciate, but that doesn’t mean a profits bonanza is in the offing for Chinese yuan exchange traded funds (ETFs).
In a Dow Jones Newswires poll, 10 currency strategists forecast that the yuan will likely rise just 0.3% by the end of September, less than the 0.7% gain we have seen since China de-pegged the yuan from the U.S. dollar. [Ways to Play the Yuan’s Uptrend.]
David Roman for The Wall Street Journal reports that the yuan could weaken against the dollar if the U.S. currency were to rise against others, such as the euro. ETFs that focus on the yuan may be one way to play the fact that China has agreed to allow its currency to float. But seeing real gains may take longer than most investors will be patient. [Time for the Yuan to Reward Investors?]
Tony Sagami for Uncommon Wisdom reports that the yuan rose 0.28% against the U.S. dollar in the week after allowing it to appreciate, which leads to a few points about the currency:
- The Chinese yuan is undervalued as a currency.The yuan needs to rise 77% before it can be parallel with the U.S. dollar.
- China’s domestic demand has skyrocketed and this has been possible by their export growth engines. Now they are able to sustain their economy within their own borders.
- A gradual increase in currency will allow manufactures time to adjust and stay competitive. China does not want to turn back its strong manufacturing base, as this would kill the exporters.
For more stories about the yuan, visit our yuan category.
- WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB)
- WisdomTree Dreyfus Emerging Currency (NYSEArca: CEW)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.