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Developments in FX Exchange

The FX exchange is almost like a living breathing creature. It is affected by basically everything that occurs in the world, regardless of where or how. Thus, it is not at all surprising when the dollar rises and falls in the middle of the night. Even though the US FX exchange may be closed down for the evening, other FX exchange markets are working oversees and across the world. Yesterday the US dollar dropped overnight due to comments from China`s central bank discussing the flexibility of the yuan.

China is trying to back up its FX exchange stating that the yuan has the ability to move on its own right in line with current market changes and conditions. China`s Commerce Minister Bo stated that the current Chinese exchange rate fails to be the primary reason for the large trade surplus the country has with the US. However, in contradiction, China`s Central Bank stated that it would further deepen the FX exchange reform.

In addition to helping the Chinese FX exchange, allowing the market to influence the trade surplus with the US would increase the flexibility of the yuan. The Peoples Bank of China also stated that they plan on phasing out the frequency and scale of operations with in the FX exchange. The plan would reduce operations in a gradual manner that should not cause any problems for either the Chinese FX or that with in the US.