Forex or the foreign exchange market is just that – i.e. a market where you have the chance to exchange foreign currencies with each other. This exchange takes place with the help of trading pairs, which are made of two different foreign currencies. Though there are a lot of fundamental similarities in how different currency pairs function, there are still peculiarities that you need to learn about certain currencies.
This is why in this article we want to zoom in on the Chinese currency Yuan and see how you can trade this symbol in the best way possible in the forex market. We will also take a look at the pairs that include this currency and go through some special features of Yuan.
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A Look at the Chinese Yuan in Forex
As the name suggests, Yuan is naturally the official currency of the country of China. Much like many other currencies in the world, Yuan also finds its roots in its oldest form which was a coin. As it so happens, Yuan literally also translates to coin.
China has turned into one of the biggest economies in the world and the number one growing economy. And precisely because China is a great economy, its currency, namely the Yuan has turned into a serious and major choice for exchanging foreign currencies.
And in the forex market the economy of the currency is a major and key factor to take into consideration. The reason is that the economy of any country is directly related and influential in the power of its currency – and vice versa. This means whatever happens to any economy will eventually manifest itself in the currency. Perhaps even sooner than any other economic area.
And it is easy to understand, since the currency of any economy is its most immediate and readily available symbol and representative.
This is exactly why Yuan makes such important and also popular trading pairs in the forex market. In the following parts we will take a look at these pairs and discuss some trading techniques for the Chinese Yuan.
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How Can You Find Yuan in the Forex Market?
In order to begin trading the Chinese Yuan in the forex market, you first need to familiarize yourself with its position in the market. And in order to do that you need to be familiar with the special symbol of Yuan in the forex market.
You, in almost all financial markets, traders and investors deal with symbols of the assets in question. This means for instance in the stock market we have something known as a ticker. A ticker is basically the handle or the nickname given to any share so that it is shorter, thus easier to write and remember.
Similarly we have a notion known as a symbol in the forex market. Each symbol is the representation of a foreign currency. How are these symbols made?
Well, symbols in the forex market are made from 3 characters or letters which represent the currency. For example USD is obviously for the US dollar, or GBP is for Great Britain’s Pound.
The symbol for the Yuan in the forex market is CNH.
Naturally, the currency pairs that include the Chinese Yuan will have the symbol CNH in them. Now that you have a handle on the forex symbols as a whole and also the symbol for Yuan, let’s take a look at the trading pairs that include Yuan.
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Which Forex Pairs Include Yuan?
Having learned that the Chinese Yuan is shown with the symbol CNH in the forex market, it is time to take a look at the most important pairs that include this currency.
- US dollar denominated by Chinese Yuan (USD/CNH): as is the case with almost all the other currencies in the world, the most common and widely used trading pair for that currency is when it is combined with the US dollar. We of course have the same case for the Chinese Yuan. This is actually the best pair in order to get into trading the Chinese Yuan because of the competitive tension that exists between the US and China. And since we are basically speculating on the price of currencies against each other, this competition makes up for great trading opportunities.
- Euro denominated by the Chinese Yuan (EUR/CNH): the pair that was mentioned above, i.e. USD/CNH, can be a bit more volatile than this one. And the reason for that is clear due to the relationship between the two countries, which of course makes that pair better for strategies such as scalping. But the EUR/CNH pair offers a more stable and less volatile way of trading the Chinese Yuan. And the stability of this pair again can be seen in the relationship between China and its counterparts in the European Union.
- Other pairs such as CNH/JPY and AUD/CNH also exist which are good for trading the Chinese Yuan. When picking the pairs, always look for the economic reasons that could underlie the relationship between those two currencies. In the case of the CNH/JPY we have the Chinese economy against the Japanese economy and in the case of the AUD/CNH we basically have the Australian economy against the Chinese one. These economic relationships are important because it means the currencies influence each other bilaterally.
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Yuan: Minor among Majors in Forex!
One rather peculiar fact about the Chinese Yuan that you need to keep in mind is that it doesn’t have that much high volume considering its position in the global economy.
The Chinese Yuan is, without a doubt, one of the most important currencies in the world, thanks to the huge economy behind it. Yet it has a really low trading volume among the major currencies in the world.
Keep this in mind when you want to begin trading any currency. Trading volume and the amount of liquidity for a currency are extremely important.
Conclusion
The Chinese Yuan is the national currency of the biggest economy in the world. You can begin trading this currency and speculate on its price fluctuations in the forex market. In this article we discussed the Chinese Yuan and the different currency pairs that include this currency.
