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!

Yuan Depreciation Lashes China Investors: How To Find and Protect Profits

Stocks in this article: BA CEA ZNH

BEIJING (TheStreet) -- The Chinese yuan fell off a cliff last week, losing a full year's worth of appreciation against the U.S. dollar after the People's Bank of China relaxed its managed float of the currency.

If this slippage becomes a trend, a weaker yuan could help Chinese exporters sell more stuff in the United States. It also could rekindle claims in Washington that Beijing "manipulates" its currency.

In China, immediate aftershocks resulted from the central bank's action. The yuan closed Friday at 6.22 to the dollar, down from 6.14 on Monday when the policy -- a widening of the band for daily yuan trading to 2% above or below the central bank's official rate -- took effect. The band had been 1%.

The last time 6.22 yuan returned a dollar's value was in March 2013. It then marched higher. By January 2014, it only took 6.04 yuan to buy $1. The rise in the yuan's value did not go unnoticed.

One shockwave after the central bank move hit Chinese airlines that used dollars to finance recent purchases of aircraft made by Boeing (BA) and other suppliers, including China Southern (ZNH), China Eastern (CEA) and Air China.

The Chinese government's Civil Aviation Administration said the yuan's depreciation since February had effectively raised liabilities for these airlines by a combined $700 million, according to the business newspaper Yicai Daily.

What had been steady appreciation for the yuan against the dollar between June 2010 and mid-February 2014 worked in the airlines' favor, the report said, boosting their exchange-rate gains by a combined $609 million in the first half of 2013.

Currency speculators profited from a reliable drumbeat of appreciation for nearly four years. The government doesn't these like so-called "hot money" investors who inject dollars into China, and for years they've tried stopping inflows by various means.

Speculators made a lot of money on the steady appreciation that started in mid-2010, after yuan-dollar exchange rates had barely moved between 2008 and 2010. The government then started signaling that the party was over in February by letting the yuan fall slowly against the dollar for several weeks. Then came the central bank action.

In fact, though, the central bank's move may have the opposite affect and encourage speculation in the long run, according to Hong Kong-based analyst Wei Yao of Societe Generale. She argued that the daily setting of a domestic-foreign currency parity rate by the central bank will become even more useful for speculators betting on the yuan's movement.

1 of 2

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