The Chinese yuan is the national currency of the People’s Republic of China. In the list of global currencies it is referred to as CNY.
At present China has a 10% share of the world’s commodity trading. It has extensive trading relations with other countries. Compared to other leading issuers of reserve currencies, China has a modest public debt and a small public budget deficit. Despite strict control of exchange rate China’s inflation rate remains relatively stable within the last few years.
The Chinese yuan to US dollar exchange rate has considerable influence over the Chinese competitiveness. The yuan rose against the dollar; meanwhile, the dollar fell against other currencies. The US dollar falling by 10 percent relative to the euro today signals that the yuan actually lost 4 percent relative to the euro. The Swiss franc increased against the greenback more than 40 percent and therefore, more than 30 percent against the yuan. Perhaps, the US dollar would continue falling against the euro and other currencies for some years, and will result in a greater strengthening of the CNY against the dollar.
As for the Forex market, the government of China has tightly bound the yuan to the currency basket, so in order to analyze it you just need to monitor its volatility. Fluctuations point to the increase or decrease of investor interest to it, so you can determine the trend while opening positions for a certain currency pair.
China and Russia have already implemented volatility of the CNYRUB currency pair, which is quite close to that of USDRUB.
Today, the Chinese yuan is not a freely convertible currency yet. But during the last few years the Chinese authorities are taking active steps to internationalize its currency. The yuan full convertibility can be achieved only through reforming the country’s monetary policy, which is quite a long process. These days China is trying to increase the investment attractiveness of the yuan by eliminating some restrictions. In case the China’s government continues to make the yuan international, it can achieve the status of the world’s reserve currency in the nearest future.