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Why is China's foreign exchange market on the rebound?

(People's Daily Online)    10:34, March 25, 2014
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Edited and translated by Huang Jin, People's Daily Online

Since Spring Festival, the long-silent foreign exchange market has been much livelier, attracting the attention of some sensitive investors.

At present, the expected annual yield of the majority of short-term banking products is around 3%. However, some high-yield foreign currency financial products have appeared on the market offering potential annual yields of 4% -5%, with some even going as high as 7% or more.

The reason why foreign exchange financial products are becoming active again is closely related to recent volatility in the foreign exchange market. This year, the Fed is gradually withdrawing from the third round of its quantitative easing policy, resulting in the expected appreciation of the dollar and other currencies. Dollar assets have become the object of capital pursuit, and this phenomenon is promoting expected annual yield related products.

On March 20 the RMB rate against the U.S. dollar fell by about three percent to 6.22 yuan, hitting a year low, and as a result the yield of foreign exchange financial products became more attractive.

In addition, the People's Bank of China has recently decided to expand the floating range of the RMB rate against the U.S. dollar, which is also having the effect of encouraging activity in the foreign exchange market.

Read the Chinese version: 外汇理财为何回暖; Source: People's Daily; Author:Chai Jin

(Editor:HuangJin、Liang Jun)

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