its moving and im going to hold until it reopens on sunday.
EUR/USD - Page 279
So im not too sure what effect this will have on USD but if anyone knows, speak up..
China’s central bank will expand the daily yuan trading band against the U.S. dollar to 1% in either direction from 0.5% starting on Monday in a bid to support the economy and ward off a precipitous slowdown.
The move is targeted toward meeting market demands, promoting transparency, and enhance the flexibility of renminbi exchange rate,” said the People’s Bank of China in a statement on Saturday.
The announcement follows on the heels of data on Friday which showed that China’s first-quarter gross domestic product growth slowed to 8.1% from 8.9% in the previous quarter.
The pace was the slowest in 11 quarters as weak exports and sluggish construction activity took a toll on the world’s second largest economy. Read about China’s slower growth
“In view of the domestic and international economic and financial conditions, the People’s Bank of China will continue to fulfill its mandates in relation to the renminbi exchange rate, keeping renminbi exchange rate basically stable at an adaptive and equilibrium level based on market supply and demand with reference to a basket of currencies to preserve stability of the Chinese economy and financial markets.” the central bank said in a statement.
Christine Lagarde, managing director of the International Monetary Fund, welcomed the move.
“This underlines China’s commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate,” Lagarde said in a statement.
The scale of the widening is bigger than the 0.7% the market had expected, according to Ting Lu, a China economist at Bank of America Merrill Lynch, in emailed comments.
The renminbi-dollar rate USDCNY 0.0000% is close to equilibrium, and there is little room for renminbi-dollar appreciation so the central bank is under pressure to build up a new foreign exchange regime, Lu noted.
“A true rule-based basket currency regime will unavoidably lead to two-way volatility of renminbi-dollar, so the People’s Bank of China should seize all opportunities to gradually increase renminbi-dollar volatility,” Lu said. “However, China will avoid significant appreciation or depreciation this year due to uncertain global environment and the need for stability during the year of leadership change.”
China’s decision to widen the band is likely to prompt other Asian countries to calibrate their foreign exchange policies and have an impact on the dollar’s movements against the euro EURUSD 0.0000% , according to currency strategists at Société Générale in their report.
The dollar firmed on Friday on a combination of tepid reading on U.S. consumer sentiment, rising Spanish debt yields and disappointing Chinese GDP data. The dollar index DXY +0.67% , which measures the greenback against a basket of six currencies, was last at 79.88. Read latest coverage of the U.S. dollar
“The official line is that the march toward liberalization goes on. Recently though, there has been more rather than less reserve accumulation in Beijing again, and the subplot must be that there is less desire as the economy slows, for the currency to go on appreciating,” said Kit Juckes, head of foreign exchange at Société Générale.
For economies such as China that rely heavily on exports to fuel economic expansion, a weaker currency helps to keep their products cheaper than competitors’.
and then we have this.. which inst always as black and white..
Speculators Pile Up Largest Net Dollar Long Position Since June 2010 - CFTC
Traders held a net $22.6 billion in bets that the dollar will appreciate, a gain of 31% in net wagers over the previous week and the largest such position since June 2010, government data showed Friday.
Speculators on the Chicago Mercantile Exchange, although a minor part of global currency traders, are frequently considered to trade the way hedge funds do, giving their positions greater import.
For the euro, traders held $16.6 billion in net bets that the common currency will fall. That represented 101,364 net contracts, up 26% over the week before, according to the Commodity Futures Trading Commission's weekly report on the commitments of traders.
Speculators trading the yen held a net $10.2 billion in bets that the currency will decline, 4% more than the previous week. That position stood at a net 66,084 contracts, marking the largest short position in the yen since July 2007.
The Swiss franc had net wagers against it worth $1.3 billion, down 33% from the previous week. That represented 9,919 contracts.
Investors held a net $1.3 billion in bets against the U.K. pound. That was more than double the previous week's negative gambles on sterling.
Traders continue to hold net wagers that the Australian, New Zealand, and Canadian dollars will all appreciated, with the largest of these positions, the Australian, standing at net $4 billion, down 21% from the prior week.
The CFTC's weekly report shows speculative investors' positions in major currencies held against the dollar. It viewed the markets as of Tuesday.
ok so .. deprecation in the YUAN equals a stronger dollar, stronger euro? Am i reading that right..
CHINA MONEY-Currency speculation seen emerging after trading band move
* Widened trading band permits speculation but adds risk
* Sends strong signal yuan's one-way rise is over
* Yuan may rise just 2 to 3 pct this year
* Needs further reforms including creating hedging tools
By Lu Jianxin and Kazunori Takada
SHANGHAI, April 14 (Reuters) - China's milestone move to widen the yuan's trading band will give banks and companies the most space to speculate on the currency since the country established its foreign exchange market in 1994.
In the near term, the widening of the band to 1 percent from 0.5 percent from the central bank's mid-point is unlikely to alter market views for a gradual yuan appreciation of around 2 to 3 percent this year, traders said.
But the move, announced by the People's Bank of China on Saturday, sends a strong signal that the days of non-stop, one-way appreciation in the yuan against the dollar are gone forever, traders said.
"The message of this move is that RMB's appreciation story is over. Greater two-way volatility will be the name of game going forward," said Qu Hongbin, China economist at HSBC.
That means both opportunities and risks for exporters and importers trying to manage their foreign exchange assets.
"If the yuan could move constantly more than 200 pips in a day, permanent speculative opportunities will emerge," said a senior trader with a major European bank in Shanghai.
"That will create a two-way trading environment which will make it much more difficult for banks and companies to manage their exchange rate risk. Speculation and risk will eventually create a real market for the yuan's exchange rate."
The yuan's move has so far been mostly confined to a daily range of 100 to 200 pips in the Shanghai-based China Foreign Exchange Trade System (CFETS), the domestic market, with movements sometimes even being limited to less than 100 pips.
Traders expect that the PBOC's widening of the band will mean the currency eventually moves more than 200 pips a day, possibly even 400 pips on occasions, over the next 12 months.
The yuan closed at 6.3030 against the dollar on Friday, having appreciated about 30 percent since a revaluation in July 2005, as China tries to balance its economy and yield to pressure from its major trade partners, including the United States, to allow the currency to appreciate more rapidly.
But investors are not betting on any big moves this year. Trading in the dollar/yuan non-deliverable forwards market shows investors pricing in about a 0.4 percent depreciation in 12 months. That has fluctuated over the past several quarters, but never strayed too far from the spot market.
In a move seen aimed at testing waters for the yuan to trade in a wider range, the PBOC has been allowing the mid-point to move by a few hundred pips in selected days since the start of March.
In the first half of March, the PBOC let the yuan weaken by 0.70 percent to the dollar in its mid-point, its biggest 11-session loss in the fixing since the set-up of the CFETS.
Over the next eight sessions, the central bank allowed the yuan to appreciate 0.82 percent in the mid-point, the biggest eight-session gain in the fixing since October 2010.
If China wants to further develop its currency market, it would need to do more work, including introducing a wider range of hedging options, traders say. China now has only a handful of financial derivative to hedge currency risk.
For example, forwards, swaps and options traded on the CFETS are occasionally used by Chinese banks and companies but the financial derivative market, China Financial Futures Exchange, does not have a single foreign exchange derivative product.
The latest currency reform, however, is likely to have a limited impact on the country's fixed income and stock markets in the short-term, although a freer yuan will permit more foreign capital inflows into China and will thus benefit its capital markets in the long term.
"The widening of the yuan's trading band points to a direction for the government to allow more foreign capital to flow into China," said bond market analyst Liu Junyu at China Merchants Bank in Shenzhen.
"That will be a long term positive factor for China's fixed income market, although short-term impact will be limited."
Ren Chengde, a senior stock analyst at Galaxy Securities in Shanghai, echoed, adding that the widening of the yuan's trading band was among a slew of recent government moves to free capital flows.
Earlier this month, China announced an expansion of quotas for foreign investment in its capital markets, raising the total quota for its qualified foreign institutional investor scheme (QFII), a main channel for foreign investment in Chinese securities, by $50 billion to $80 billion.
hmmm wierd reaction... no gap, just a minor congestion. i would expect the spread increase is positive for the euro cross and would cause a minor pop..
alot of shorts are lined up too.. so any upward movement will cause a cover.And it was sitting on support .. which depending on what levels you use are from 1.303- .307