Futures Market News
Yuan hit by euro zone debt concerns
May 25, 2010 03:58 PM
Chinese currency futures have not been immune from growing worldwide concern about the euro zone and its financial prospects.
The euro itself has been hit hard amid concern that one or more member states could end up defaulting on their substantial debts, potentially leading to a new round of financial losses for some major banks that hold sovereign debt bonds.
Some have warned of an emerging spiral pattern where nervous investors drive up bond rates and, in turn, the cost of borrowing for countries already facing heavy debts. As the cost of borrowing rises for these countries, the likelihood of a default looms more prominently on the horizon.
When it comes to China, its currency has suffered amid the likelihood that economic turmoil in Europe and a lower currency value will negatively impact its rapidly expanding export sector.
In fact, a recent Bloomberg News report said that in Monday's trading, Yuan forwards fell at their greatest rate in 15 months. This was reportedly due in part to expectations that China hold off on reforming the way it handles its exchange rate.
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