Many investors as well as Forex trading brokers are trying to gain access to the Chinese Yuan. This currency is constantly increasing in market value, which makes it a desirable for any trader. It is worth noting that the Yuan continues to be pegged to the U.S. dollar, and cannot be traded without restrictions. However, it is certainly heading that way of free trade as the restrictions become more loyal to investors over time. As of today, investors can choose among some basic yuan investment options:
Directly purchase yuan and keep the money in that currency
Invest in Exchange-Traded funds (ETFs) or Exchange-Traded Notes (ETNs) designed to reflect the performance of the yuan
Purchase futures contracts in yuan currency or purchase the yuan in compliance with the value of the U.S. dollar in the forex market.
Investing in the Chinese Yuan
Since 2005, the yuan has reevaluated its price according to the the U.S. dollar value by over 25%, in spite of the recent devaluation made by the Chinese government. This is the reason why many market analysts consider that the yuan will eventually surpass other leading currencies.
It is important to note that, thanks to the growing Chinese economy, China is quickly transitioning from being the leading emerging market economy to become the largest economy in the world. Therefore, the Yuan recognition is increasingly penetrating at an international level. Forecasts say that the yuan will soon be one of the world's leading reserve currencies. The establishment of the Contingent Reserve Arrangement, which can be described as a mini-version of the International Monetary Fund (IMF) for the Asia-Pacific region, and the Asian Infrastructure Investment Bank (AIIB) are examples of China’s dedication to conquering a more notorious position in the global financial economy.
Now, let us look at the facts: according to HSBC Bank, in 2010 the proportion of emerging market trade transactions in Yuan increased from less than 5% to 50% in 2015. For its part, in 2013, the Wall Street Journal stated that the yuan had outperform other leading currencies, such as the yen and the euro, in global trade market, and China continues instituting direct currency exchange agreements with leading trading partners, and this weakens the positions of the U.S. dollar's position as the world's leading reserve currency.
Keeping it yuan
If you want to keep the money in yuan, you have two options: since the Bank of China has subdivisions in New York, Chicago and Los Angeles, you can open savings or high-yield time deposit accounts with U.S. dollars, but your money will be designated in yuan. However, if you want to make withdrawals, your money will be exchanged back to U.S. dollars. Keep in mind that you will only get the benefits from any increased value of the Chinese currency if you have funds in these accounts.
You can also open bank accounts designated in yuan with EverBank, thanks to its WorldCurrency Access Deposit accounts, which are IRA-eligible and fees free accounts. For this, you will need a minimum $2,500 opening deposit. Like other money market accounts, there is a limit on the number of monthly transactions you can make, and, similar to the accounts previously mentioned, withdrawals are only allowed in U.S. dollars, since the yuan is a foreign currency.
Of course, there is a possibility to get an account at Forex broker and buy Yuan in one of the currency pairs and keep your position for long period of time., But since you will have to pay fees for keeping it ower weeks, this option will not be profitable in the long run.
Investing in the Yuan through ETFs or ETNs
You can also invest in the yuan through ETFs, which was shaped to work in compliance with the actual price of the Chinese currency. One of the ETFs is the PowerShares Chinese Yuan Dim Sum Bond Portfolio Fund, an EFT made of a dim sum bonds portfolio, which are estimated in the yuan even though they circulate outside of Asian continent. This fund offers capital value in conformity with the yuan a substantial dividend yield of 3.53% and possible capital gains from increased bond
However, the WisdomTree Dreyfus Chinese Yuan Fund is the most broadly traded Chinese Yuan ETF. The fund intends to emulate the work of Chinese money market rates and the appreciation of the yuan in accordance with the U.S. dollar. Lastly, you can also opt for the Market Vectors Chinese Renminbi/USD ETN, which aims to replicate the general performance of the yuan in compliance with the U.S. dollar tracking the S&P Chinese Renminbi Total Return Index. This underlying index is comprised by developing three-month non-deliverable currency forward contracts on the yuan/U.S. dollar exchange rate.
Futures and Forex Trading
To make the most of your investment in the yuan using leveraged investments, you should try currency futures or forex market trading. You can find Yuan/renminbi currency futures traded in the Chicago Mercantile Exchange (CME) below the RMB sign. There are also futures options offered in the yuan.
Also the number of Forex brokers that offer trades in the U.S. dollar-yuan currency pair (known as USD/CNY) is quite small, this is estimated to gradually rise since the yuan is bit by bit becoming a more freely traded currency at international level.
However, you should bear in mind that the leverage in these kind of investments is quite high, and they are only recommendable for traders that can deal with the great risk that comes with the greater level of possible profit.