This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Dion's Weekly ETF Blog Wrap

Stocks in this article: FDN CYB IAK

How to Play the IMF's Yuan Review

Published 7/27/2010 8:14 a.m. EDT

The IMF announced the results of a review yesterday determining that China's currency, the yuan, is still undervalued. This reinforces the view I have held that investors can use WisdomTree Dreyfus Chinese Yuan (CYB) as a vehicle for slow but steady gains.

The peg that China had maintained with the dollar was loosened on June 19; since then the currency has appreciated against the dollar by 0.7%. According to the IMF's review, though, it still has further to go before it can be considered appropriately valued.

CYB increased by about 1.0% in the week following the peg readjustment, and then leveled off to where it still currently is at gains of about 0.5% since that time.

Investors should note that the gains in CYB will be slow, and investors should only play this fund if they have overall confidence in the progress of the Chinese economy in the long term. As China moves away from export-oriented growth and toward domestic, consumer-generated growth, having a currency that is appreciating against the dollar and against other currencies will become less potentially harmful. Such a shift could mean that the government will be less likely to keep such a strong hold over it.

Investors should not assume that the IMF's findings are capable of bullying the Chinese government into taking a more liberal stance on its currency, since trying to predict any government's actions is tricky business. China has also not been easily muscled on the topic of its currency in the past. Looking for a short-term bounce after this announcement in CYB could be an option, but since the fund is not a fast mover, it is best used with a more long-term mindset.

So, the findings can give instead investors confidence that there is still room for appreciation in the currency as China's economy develops and that CYB will be a good long-term play.

Finally, timing is important with this ETF in order to maximize gains on the slow-moving fund even in the long term. Therefore, if there is a blip upward after the IMF findings, investors should wait for it to cool off -- just as the fund cooled in the weeks after the initial euphoria following the June 19 readjustment -- and then look to gain exposure.

At the time of publication, Dion Money Management was long CYB.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs