The Chinese yuan has not caught on very strongly in currency markets until now and the People's Bank of China (PBoC) has been looking into ways to attract Forex traders to these markets. Lowering the current high margin requirements is one incentive that could bring in more clients to Forex companies and FXPro is one of the first Forex brokers to take this initiative.
FxPro is now offering a leverage of 1:100 on its MT4 platforms on the offshore renminbi pair USD/CNH. The move comes several days after the People's Bank of China cut its official benchmark interest rates in an effort to boost the Chinese economy. FXPro is a FCA regulated broker that aims to draw more trading of the Chinese currency which analysts predict will start behaving more and more like a "?normal currency" by 2015.
The renminbi (RMB) is the official currency of the People's Republic of China and is issued by the People's Bank of China, the monetary authority of China. The yuan is the basic unit of the renminbi, but is also used to refer to the Chinese currency in general, especially within international environments. The distinction between the terms "renminbi" and "yuan" is similar to that between sterling and pound. The ISO code for renminbi, which may also be used for the yuan, is CNY, an abbreviation for "Chinese yuan." When it is traded in Hong Kong it is referred to as CNH. The currency is often abbreviated RMB.
The renminbi is legal tender in mainland China, but not in Hong Kong or Macau. However, Renminbi is often accepted in Hong Kong and Macau, and are easily exchanged in the two territories, with banks in Hong Kong allowing people to maintain accounts in RMB.
Analysts Disagree
Not all analysts agree that the rate cut announced by the PBoC will have much of an impact on the renminbi. Some believe that the PBoC move is only the beginning of an easing cycle. But others, such as those at Goldman Sachs, have voiced concerns that the rate cut will have only a limited impact on the growth advancement of the Chinese economy.
And strategists at Morgan Stanley have noted that "?rate cuts along with targeted credit support will help prop up the path of reform, but there will not be significant easing to put China back on the path of over stimulating the economy."
It comes as no surprise that FXPro is the first Forex broker to have chosen a new approach to Chinese currencies. Since its founding in 2007, it has proven to be an innovative company, offering eight different trading platforms and governed by several regulatory organizations.
Currency mavens predict that in the long run, the Chinese yuan will probably increase its trading activity. While at the same time they believe, based on the fact that the yuan has been floating in a narrow band these past few months, that the Chinese currency will probably never be one of Forex traders' favorites.
On the other hand, there is a good chance that if the Chinese economy continues to falter, the PBoC will probably adopt additional measures to boost the Chinese currency in the coming year. The FXPro initiative should help jump start the process.