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The value of China’s Yuan has been going down steadily over the past few months. That trend will likely continue, as the currency reached its lowest point since September of 2010. For now, it remains anybody’s guess as to how this scenario will play out long-term, but things are not looking optimistic. At the same time, China continues to be very bullish on Bitcoin, showing the need for alternative financial tools.
Almost no day goes by without the Chinese Yuan weakening against the US Dollar. To be more precise, ten of the past eleven days have seen a decline in value. While it seems evident the PBOC “allows” for this decline, such a trend cannot be sustained indefinitely. Particularly not now that the IMF has recently added the Yuan to its basket of reserve currencies.
A Rough Road Ahead For The Chinese Yuan
Looking at the charts, it is evident something is going on behind the scenes. Financial experts see this as a way of China sending a message to the Federal Reserve regarding their indecisiveness on interest rates. Despite what some people may want to believe, the world’s economy remains tied to the US Dollar and decisions made by the Fed.
Although the sharp decline in value is noteworthy, it is not entirely surprising either. Despite efforts by China’s central bank to stabilize the Yuan in the past, they have utterly failed to do so. An artificial value would not do the currency any favors in its current state. Then again, the “fixed rate’ between CNY and USD will always remain a priority for the bank.
Now that the Yuan reached its lowest point since September 2010, the question becomes what the future may hold. Stopping this devaluation is virtually impossible. Keeping the rates at their current level will not work either. Further declines are not improbable, although they might not be spectacular.
While all of this financial turmoil continues, Bitcoin seems to have found its new “price plateau” in China. Despite the very high trading volume, the price is not budging under pressure. In fact, there was a nice price spike just a few days ago, pushing the Bitcoin value back over US$625. An exciting future awaits, but Yuan holders may want to start looking for alternative financial options.
Source: Zerohedge
Header image courtesy of Shutterstock
