Anyone up for a challenge?

Is the following correct?

Not being an expert in the subject of foreign exchange and doing it as an investment strategy, my colleague and I stuck up and discussion. He wants to buy Chinese RMB now and sell them at after China floats the currency. SO will he make money or lose money?

For ease of understanding I used simple numbers to determine what will happen.

Example 1
Suppose US$1 buys RMB$10
Therefore for US$10 one can buy RMB$100

Now if the currency is devalued the exchange rate should change…
Now US$1 buys RMB$20

Example 2
So if I sell my original RMB$100 / 20 then I have lost half my value in $US and now have US$5

On the other hand if the exchange rate goes the other way I make a profit.
US1$ buys RMB$5 then my original RMB$100 is now US$20

Voila a profit…

Now form my understanding it

Why don’t you google this or something, you sound a little bit like some stoned person coming up with what he thinks is a great idea. :laughing:

First off the exchange rate has been 8.2RMB to buy 1USD for as long as I can remember. Second, the RMB will be increasing in value not decreasing, but nobody knows when. In the future maybe 1USD will only buy you 6 RMB. Understand. So go and buy some RMB if you want. No you can’t buy in Taiwan and I think you shold go rent the movie Red Corner with Richard Gere before you try to take much money out of China. By the way, it is not even easy to get USD out of China. Do some research. So many companies in China have setup triangle trading businesses to get money out of that Communist country with no rule of law. Go buy some real estate or stocks in the USA and you should get some better returns. Don’t trust the Chinese.

i wouldn’t waste money on short term currency speculation.

It’s true you can make out like a bandit, if you are patient, and can spot trends like the Euro appreciation.

But the currency trading market uses a lot of leverage to make big profits, something like 100:1 or more.

In other words, it’s easy to make a ton, but easier to get wiped out completely.

I do expect the NTD$ to appreciate 5%-10% over the next year or so, but I’m not gambling on that, and the currency could easily trade ±5% over the next year or so. So…

Kenneth

The AUD and USD fluctuate nicely over a 2yr period. Made a killing on the most recent AUD appreciation.

I certainly understand this…this is an option that he wouldn’t have.

Thank you hobart. In theory his plan would work and I misunderstood the process… there exchange RMB will appreciate not depreciate.

Ski