ECONOMY

What is Yuan & why it place an important role globally?

Yuan is a Chinese currency; China has grown so quickly and surprisingly due to its super cheap exports.

China has the world's largest money printing operation but still fails to meet demand for Yuan.

DEMAND AND SUPPLY

Buy Foreign currency with Yuan when Demand exceeds supply.

Sell foreign currency for Yuan when supply exceeds demand.

DEVALUATION

Devaluation is lowering of the value of a country's currency within a fixed exchange rate system and keeping it at fixed rates irrespective of the fluctuations in the global currency market. The lowering of a currency helps the nation export more vis-à-vis other countries. For example, suppose one dollar is equal to Rs 100. And if the rupee was devalued by 10 percent, the equation becomes USD 1 = Rs 110. This means Rs 10 extra for exporters for every single dollar they earn in the global market. 

What could be the Impact? China is US’ biggest lender. It holds USD 889 billion worth of

US government bonds - creating a potentially potent weapon. If China decides to dump the holdings, US dollar will collapse, plunging the world’s largest economy into deep chaos.

DEMAND-SUPPLY CURVE

Mar/11 Apr/11 May/11 Jun/11 Jul/116.3

6.35

6.4

6.45

6.5

6.55

6.6

6.65

6.76.66283999999999

6.60481999999999

6.54679

6.48877

6.43075

Series 1

Series 1