Forex Marketz Daily Forex News – Fully Markets Update
USD/CNH (6.3666)
Some points to consider in this Forex market:
- The US Treasury Department estimates cash outflow in China of $250 billion in first half of 2015.
- The valuation of the Chinese Renminbi is below its medium term valuation.
- US Treasury agrees with the IMF about the recovery outlook for China.
Overnight, the US Treasury Department released its report to the Congress on International Economic and Exchange Rate Policies.
This report details how the US Treasury Department notes that non-foreign direct investment, or FDI, to China and its estimated cash outflows will be around $250 billion from January to June of 2015. Outflows reached $80 billion by July, coinciding with their equities markets correction. By the end of August, when the Peoples Bank of China (PBOC) introduced its devaluation of their currency, the report shows the outflows ha increased to $200 billion out of China. This will bring the total outflow of FDI cash from China to $450 billion within the first eight months of fiscal year 2015.
In a previous report, on this very topic, the US Treasury Department, mentioned that that the Yuan was significantly undervalued. They have since replaced this view with a softened stance that states that the Chinese Renminbi is below its “appropriate medium term valuation.” This comes after the PBOC and Beijing released their new referenced rate policy. This caused the USD/CNH to gap higher by six percent. The move higher is now a more restrained gain of 2.5 percent. The US Treasury believe the recent fall lower in this Forex market reflects a concerted effort by Beijing and the PBOC to keep the CNH from devaluating even further.
