The WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB), Market Vectors Chinese Renminbi ETN (NYSEArca: CNY) and the CurrencyShares Chinese Renminbi Trust (NYSEArca: FXCH) have been mostly steady over the past month, but that steadiness could give way to losses as professional traders up their bearish bets against the Chinese currency.
The PBoC’s move may also signal a start to the country’s move toward reforms – many have criticized China’s currency policy, arguing that the central bank has artificially strengthened the yuan. Consequently, with the devaluation, the yuan may be more closely aligned with market actions.
CYB provides an actively managed approach to gain exposure to the Chinese yuan. It achieves its objective by investing in short-term, investment-grade instruments.
CNY, an exchange traded note, follows price movements between the yuan and USD. This note is open to credit risk and uses rolling, three-month currency futures contracts to provide exposure to the exchange rate of the Chinese yuan to the U.S. dollar.
FXCH maintains a deposit account denominated in Chinese renminbi, and interest earned will be used to pay expenses and any left over will be distributed to shareholders. [Violent Turn for Yuan ETFs]
“Some of the biggest names in the hedge-fund industry are piling up bets against China’s currency, setting up a showdown between Wall Street and the leaders of the world’s second-largest economy.
Kyle Bass’s Hayman Capital Management has sold off the bulk of its investments in stocks, commodities and bonds so it can focus on shorting Asian currencies, including the yuan and Hong Kong dollar,” according to MarketWatch.
“What matters more is whether this change ushers in a period of sustained currency depreciation. The yuan’s slow and substantial appreciation over the past decade indicated Beijing had abandoned the use of foreign exchange (FX) policy to stimulate the economy. Dusting off this tool and re-applying it would constitute a threat to EM stability in particular,” said BlackRock in a note out last year.
“Billionaire trader Stanley Druckenmiller and hedge-fund manager David Tepper have staked out positions of their own against the currency, also known as the renminbi, according to people familiar with the matter. David Einhorn’s Greenlight Capital Inc. holds options on the yuan depreciating,” adds MarketWatch.
Market Vectors Chinese Renminbi ETN
