The Renminbi is the official name of CNH. However, it’s commonly known as the Yuan. This currency is one of the world leaders in terms of liquidity because China happens to be the second economy in the world, while the United States retains the first place. Moreover, the Chinese economy is very technological and modern.
The Yuan is issued by the People’s Bank of China executing the duties of the Central Bank. The PBOC regulates the Chinese financial system. It sets the discount rate and conducts other activities aimed at supporting the Yuan. Daily, the significant financial institution publishes the Central Parity Rate. The given document specifies the recommended CNH rate against other currencies.
The watchdog allows trading CNH at a value different from the set one by no more than 2%. If its quotes go beyond this value, the PBOC immediately measures to stabilize CNH. However, these measures don’t directly impact the CNH rate. The matter is that there are two currency pairs involving the Chinese currency:
Quotations of the listed assets don’t differ significantly from each other. Well, the difference in their rates usually doesn’t exceed 10-20 points. The currency pair USD/CNH showed up as a separate financial instrument only in 2010. Earlier, the Yuan was pegged to the American dollar. Subsequently, China significantly liberalized the national monetary policy.
The US dollar happens to be the primary currency in the foreign exchange market. It’s present in nearly all currency pairs. The US significant financial watchdog, the Federal Reserve issues USD.
The currency pair USD/CNH is greatly influenced by news from China and America. Special attention needs to be paid to changes in discount rates. Moreover, it’s also necessary to closely watch the changes in macroeconomic indicators of the two nations. The publication of important news can generate considerable volatility of the currency pair.
The currency pair USD/CNH is traded mostly by experienced investors. It’s too complicated for newcomers. To be good at purchasing this pair, apart from rich experience, you are bound to have good command in fundamental and technical analysis.
Although the Chinese economy appears to be the second-largest in the world after the greenback, the Yuan can hardly be regarded as one of the most popular Forex assets. Many investors stay away from this asset. However, with a rational approach, it’s possible to earn on this pair.
You require comparing fundamental and technical analysis data. You need monitoring crucial news releases in both currencies. Thus, you can trade profitably. Don’t neglect money management. Don’t purchase an amount the loss of which can be devastating for your deposit. Don’t spend more than 10% of your trading deposit to carry out one transaction. Use leverage wisely. Thus, you will protect your deposit from fatal losses.