- Chinese yuan currency-related ETFs strengthen to a four-month high
- The yuan currency touched its strongest level against the U.S. dollar since early December on Friday
- China may be trying to keep its currency in line with its top trading partners – Japan and Europe, says RBC Capital Markets
Chinese yuan currency-related exchange traded funds have strengthened to a four-month high and are trading back above their long-term trend lines as Beijing boosts its fixed rate in response to the euro currency’s sudden spike.
Year-to-date, the WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB) gained 2.1%, Market Vectors Chinese Renminbi ETN (NYSEArca: CNY) rose 3.1% and the CurrencyShares Chinese Renminbi Trust (NYSEArca: FXCH) dipped 1.2%. CYB and CNY broke above their 200-day simple moving averages.
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.
The yuan currency touched its strongest level against the U.S. dollar since early December on Friday, with the dollar now trading to RMB6.4821 earlier in the day.
Analysts believe the yuan moves were a result of a sharp rally in the euro Thursday after the European Central Bank President Mario Draghi hinted that the central bank would refrain from further interest rate cuts, the Wall Street Journal reports. [Euro ETF Surges as ECB’s Draghi Triggers Volatility]