Tags: jim | Chanos | china | Yuan | Weaken

Chanos: Yuan Will Weaken Despite Recent Gains

Wednesday, 22 Sep 2010 08:31 AM

The Chinese yuan is due to weaken despite a recent strengthening trend because the housing market there is going to burst, says Jim Chanos, founder of the hedge fund Kynikos Associates.

The U.S. government has often criticized China for keeping its currency artificially low in order to gain an edge in global trade, and recent comments from the Obama administration pushing for a strengthening of the Asian giant’s currency has bolstered the yuan in foreign-exchange markets.

That won’t last, says Chanos, because the once red-hot housing market there will burst despite the government’s efforts to slow the economy softly.

“We think there's a big speculative bubble that's going on over there,” Chanos tells CNBC, adding his fund is shorting companies tied to the housing markets as well as those who import commodities.

“My concern would be the yuan gets depreciated, not appreciated.”

The yuan broke 6.7 per dollar recently — the first time since 1993 — after  President Barack Obama said China hasn’t done what it said it would do to strengthen its currency.

That gain, market watchers say, is the product of politics.

“The yuan’s quicker appreciation is related to the political game between China and the U.S. on currency policy,” says Isaac Meng, a Beijing-based economist at BNP Paribas, according to Bloomberg.

The dollar’s performance in global markets is also playing a factor, Meng says.

“It’s also related to the dollar’s broad weakness because the yuan is managed against a basket of currencies.”

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The Chinese yuan is due to weaken despite a recent strengthening trend because the housing market there is going to burst, says Jim Chanos, founder of the hedge fund Kynikos Associates. The U.S. government has often criticized China for keeping its currency artificially...
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2010-31-22
Wednesday, 22 Sep 2010 08:31 AM
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