The Hindu Business Line : Metals market awaits China currency revaluation

WILL the Chinese currency be re-valued any time soon and by how much? Renewed expectation of a revaluation in the Chinese currency Renminbi is not only currently engaging the attention of players in the metals market, but also fuelling speculation.

The near-term premium in non-deliverable forwards on the RMB in offshore markets rose to its highest in more than a year last week, pricing in a one per cent rise in the RMB within a month and a near 6 per cent rise within a year, experts pointed out.

Chinese metal consumers are seen holding off purchasing decision as much as possible at the moment. For instance, copper imports during October were down.

However, expectation of revaluation is only one of the two reasons, the other being current high prices of base metals and a firm backwardation, according to base metals expert with Barclays Capital.

"In general, we think, a RMB revaluation would be positive for LME (London Metal Exchange) prices, although only a small change is unlikely to have any market impact on either imports of commodities or exports of manufactured products", said Ms Ingrid Sternby, base metals analyst.

RMB revaluation could mean an upside pressure on the other Asian currencies against the dollar which will generally be supportive to metal prices, it is believed.

Both aluminium and nickel prices continue to remain firm on the LME despite changes in inventory.

Copper prices are racing up with stocks falling further from the already critically-low levels and nearby spread tightening.

Zinc is also pushing higher helped by positive physical fundamentals, a weaker dollar and positive sentiment in the rest of the LME complex, the expert asserted.