Chinese Yuan ETFs for Exposure to the 7th Most-Used World Currency

ETF Trends

The Chinese yuan has become the seventh-most widely used world currency as of January. Investors interested in gaining exposure to the Chinese currency can choose among a number of exchange traded funds that track yuan movements against the  U.S. dollar.

According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), China’s yuan surpassed the Swiss franc in world payments  in January, becoming the seventh most widely used currency, reports Michelle Chen for Reuters.

Yuan-denominated payments rose 30.6%. Meanwhile, growth for all payment currencies increased 4.8% in January. Nevertheless, yuan payments were concentrated in Hong Kong, which made up 73% of market share.

“Looking at the first month of 2014, which was the highest payments value recorded for RMB so far, it is clear that the RMB is on its way to remaining a top 10 currency for global payments,” Michael Moon, SWIFT’s Asia Pacific director of payments markets, said in the article.

The renminbi, or RMB, is the official currency, and the yuan is considered a basic unit of the renminbi.

Over the past three years, the yuan has toppled 22 currencies in global payments usage and now ranks behind only the U.S. dollar, euro, British pound, Japanese yen, Canadian and Australian dollars.

The yuan has appreciated 35% against the U.S. dollar since 2005. The currency, though, has recently depreciated against the greenback as the People’s Bank of China lowered its exchange rate to fight against speculative inflows.

As the country tries to balance its economy and avoid trade conflicts with the U.S., investors can benefit from the value of the yuan rising. Investors interested in gaining exposure to the yuan have a couple of ETF options. [WisdomTree: What’s Next for the Chinese Yuan?]

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) provides an actively managed approach. This is a good investment grade tool for those that want exposure to money market rates in China and the yuan/dollar relationship. CYB is up 2.8% over the past year.

The Market Vectors Chinese Renminbi ETN (CNY) is an exchange traded note that follows. This note is open to credit risk and uses rolling, three-month currency futures contracts to provide exposure to the exchange rate of the Chinese yuan to the U.S. dollar. CNY is up 2.1% over the past year.

The CurrencyShares Chinese Renminbi Trust (FXCH) maintains a deposit account denominated in Chinese renminbi, and interest earned will be used to pay expenses and any left over will be distributed to shareholders. FXCH is up 1.6% over the past year.

For more information on the yuan currency, visit our Chinese yuan category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

View Comments (0)