“The sudden slide of the Chinese currency over the last week has raised fears that the yuan is nearing levels that could trigger an unwinding of billions of dollars in highly leveraged bets on the currency’s appreciation. Traders and strategists say a portion of the yuan’s recent decline can be attributed to investors looking to get out of trades before losses soar.
Daily trading volume in the yuan has exploded recently, tripling to $120 billion a day since 2010, when China allowed trading in its tightly controlled currency. The yuan is now the ninth-most traded currency in the world, according to the Bank for International Settlements, rising from 17th two years ago.
In the past year, trading in derivatives tied to the currency have soared as investors bet on a continued rise in the yuan. According to Deutsche Bank, approximately $250 billion worth of these derivative contracts were traded in 2013, the first year these products took off. Already in 2014, between $80 billion and $100 billion have been traded, the bank says….”
If you enjoy the content at iBankCoin, please follow us on Twitter
