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Interest Rate is among the most important fundamental data that impacts the currency of a country. It's of vital importance for any trader to keep a watch on this important data for his or her trading activities. A change in Interest Rate viz. a hike or a cut could be a percursor to a long term bearish or bullish bias respectively on the currency.
Interest Rate is the also most important tool major Central Banks around the world like FED, ECB, BOJ, PBOC etc use to guide the economy and the overall markets to its desired goals. Interest Rates are set by Central Banks to majorly keep inflation within a limit and to promote or curb lending. For instance, if prices for essential items and inflation are ballooning in conjunction with better economic conditions, Central Banks will hike Interest Rate to curb money supply to control price rise and inflation.
How Rates are calculated? :
Board of Directors of Central Banks controls the monetary policy of its country. They set the short-term interests at which banks can borrow from one another. Central Banks gather various relevant economic indicators from its economy to decide on Interest Rates to keep as its is or to cut o…
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Natalia_Kisenko avatar

good job!

Jenny26 avatar
Jenny26 18 Feb.

nice article))

zarina avatar
zarina 19 Feb.

done a good article!

Olkiss70 avatar
Olkiss70 21 Feb.

useful work!

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I find it useful to look at the big picture from time to time. In technical analysis terms, that usually means inspection of weekly and/or monthly charts. However, I rarely get to see analysis of "ultra-high" timeframe charts, so I decided to make a couple of attempts of my own. Previously, I analysed long term charts of the Euro, the Yen, the Cable, the Swissie, the Loonie, the Aussie and the Kiwi.
Today I'll have a look at yearly and quarterly Yuan* charts that are covering the period from 1971 to 2015. While the yearly may be of some use for a quick overview of price action, the quarterly chart offers more detail and makes trends, ranges and patterns more clearly visible. I will be focusing on the latter for my analysis.
*I use the term Yuan (capital letter) to denote USD/CNY pair. Though, the below charts are actually composed using both USD/CNY daily data (1971 - 2012) and USD/CNH tick data (2012 - 2015). Please see the "Onshore and Offshore Renminbi" paragraphs below for an explanation regarding both pairs.
Yearly Chart
Quarterly Chart
Renminbi and yuan
Both terms are often used interchangeably to describe Chinese money but there is a distinc…
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BeautybyLesya avatar

Great job!

VictoriaVika avatar

Good luck :)

WallStreet6 avatar

Interesting, but I don't trade it

lelipuzik avatar
lelipuzik 31 Dec.

nice work!)

al_dcdemo avatar

Thanks to all for your great comments!

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Role of Central Banks in Currency rates This article is to shed a few things about the roles of various central banks in controlling currency rates. If we go deeper in understanding the working compulsions of CBs, it will be amazing that every other Bank is using different tools for the same purpose. The main role of Central Bank of the country is to control monetary policy and regulate Banks and other financial institutions as well as to keep the currency rates stable. China doesn’t float free float currency, namely Yuan or Renminbi . Daily before market opens, PBOC ( Peoples Bank of China ) fixes the Rate to USD in line with International market conditions with a price band fluctuation control of 1% per day, on both sides. If letting their own, CNY into free float, it will appreciate minimum 15-20% at once, due to economic fundamental comparison between China and US. China’s GDP growth is around 9% where US is hobbling around 3%. Overnight all the exporters will sign and being one of the top economy in the world, it will lead to chaos in local market and may even lead to a stage like Japan, which is struggling to beat the appreciation of Yen. As all the readers are clos…
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Nicco avatar
Nicco 17 Jan.

After reading your article It would be interesting to discuss the role of the market in currencies rates and, especially about who is the price maker finally: the Central Banks OR the Market, the Central Bank AND the Market, ONLY Central Banks, ONLY the Market...???

sengeevenindia avatar

yes! That is the big question! today the biggest winner and who have very broad smile is SNB! They bought billions of Euros to defend the EUR/CHF floor at 1.2. During this period and even after EUR/CHF hitting 1.25, there are some in the market , expecting and fuelling that SNB should lift the floor to 1.25 or even to 1.3. But that is far fetched in my opinion. This climb will help SNB to relax a bit and they would never test the market with higher floor as that will be that much difficult to defend the higher floor!

sengeevenindia avatar

Moving to BOJ, already Koichi Hamada, a special economic adviser to Abe has stated that YEN at 95-100 is OK and only problematic if it reaches to 110. Already some eyes are brewing with the sudden slump of the YEN. Especially South Korea and Russia in G20 have started rising voices of unavoidable currency war in 2013. Even US exporters started urging Obama to check YEN's fall as it will be detrimental to their business. So Satisfying one and all in the market as well as to look after the Own Economy, Every other Central Banks need to devise different tools to combat same problem!

ante777 avatar
ante777 21 Jan.

Today important news coming from BOJ. Will see. Good article.

SpecialFX avatar
SpecialFX 29 Jan.

I wouldn't really agree that the strong CHF has ruined Switzerland, like the Yen did to Japan. Japan has had roughly 20 years of slow growth, or even recession with deflation, but Switzerland has been doing great, with only a couple of bad years in that time :) Hope to read your next article on the subejct. BTW, this is fresh news, the RBI has cut interest rates about an hour ago!

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