China / Yen

Fortunately, SimpleNoRisk receives many e-mails asking us about currencies, markets... We love to get in touch with our readers. Once in a while, one of this questions is particularly demanding. We will show you the case: Spanish pilot who started his mortgage in yens at a bad time (EURJPY=161) and now works in Hong Kong, so he´s been paid in HK$. He is worried because his wages mean less money every month, due to currency fluctuation. He is thinking of changing some money into yuan. He also wants to have a strategy for his mortgage.

Step by step. First we have to know that the Hong Kong dollar is somehow pegged to the USD. As we can see on the graph of our left, the movement in this pair is ridiculous (7.75-7.85). So, to better understand what´s going on, we will follow the USD. However, it´s necessary to advise that the relation between USD and HKD could change any time. Now we did have two demands: in which currency should he preserve his wealth and some strategy for his mortgage.

Famous Jim Rogers has been betting on Asian currencies and has explained why in many articles and interviews (extremely interesting). We think he is absolutely right and we are bullish on Renminbi (CNY) and Aussie (AUD).

By the way, once and for all, here is the difference between the yuan and the Renminbi. Renminbi, loosely translated as the people's notes, is the official name of China's currency. Yuan is the unit of account. This distinction confuses Western journalists to no end. So it would be proper to say that, "China may revalue the Renminbi," or that, "Average wages in Chinese manufacturing are 917 yuan per month." But not that, "China may revalue the yuan," or, "This bun bao costs 3 Renminbi" (example from Yahoo Answers).

However, Jim Rogers is long on yens, and we don´t really see a trade there. We will have to wait. So, to answer the first question, it could be a good idea to store some yuan.

Related to the second question, on the right we have displayed the chart for the pair USDJPY (as we have seen the HKD is pegged to the USD). Unfortunately, there is not good news. He should have acted before, and now it´s too late to follow any system. The problem comes from the fact we are moving outside the bottom floor and sometimes we see expansions in the limits (marked by small squares). We don´t know yet if this case is the case and we are going to see a big rebound, or if the yen is crossing down heavily. If the yen continues outside the line, perhaps it will be the time to change the mortgage...