Renminbi revaluation helps yen

Story link: Renminbi revaluation helps yen

In reaction to the sudden decision by China to revalue the renminbi, the yen gained 2.1 percent in relation to the US dollar by early afternoon in New York, to stand at ¥110.06.

Before China’s announcement, the yen had been falling sharply due to rumors of the possibility of early elections in Japan.

Trade in the yen was brisk. For example, on the Chicago Mercantile Exchange, the volume of yen forex futures contracts traded had climbed to 97,000, in comparison to the 61,000 traded on that exchange all day on Wednesday.

Trade in other Asian currencies was also heavy as investors wagered that other nations in the region would also have to allow their currencies strengthen, even though Hong Kong and Singapore had said they would not change currency regimes.

The timing of China’s revaluation move took investors and analysts by surprise, coming as it did slightly earlier than most believed it would after Beijing’s continuing reluctance to move on revaluation after receiving pressure concerning the issue from the US and other nations.