The Chinese yuan appears to be moving into the spotlight. Not only is the U.S. government applying additional pressure on the Chinese government to allow for quarterly appreciation, so is the marketplace. One of the world´s most respected commodity speculators, Jimmy Rogers, announced to the press this week that he was moving assets out of U.S. dollars into Chinese yuan, forecasting that the yuan would quadruple in years ahead. On the same day Mr. Rogers made his forecast, the yuan posted its largest gain in a month against the U.S. dollar, moving past the psychological point of 7.5. The yuan reached a new all-time high of 7.4835 on Thursday, October 25. Forward contracts in the FX market suggest a continued appreciation of the yuan.

This yuan appreciation will further squeeze textile exports; however, the impact will be limited if the appreciation rate continues below that of the U.S. dollar depreciation value against the euro and other currencies. While the yuan has appreciated against the U.S. dollar, it has actually fallen against the euro, Turkish lira and other currencies. As the following chart illustrates, the yuan has actually weakened against the euro over the past two years.

Source: Globecot