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Taiwan punters snap up Chinese yuan on rate hopes

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26.04.2010 10:52
Taiwan punters snap up Chinese yuan on rate hopes

By Ralph Jennings

TAIPEI, April 26 (Reuters) - Huang Cheng-chan buys about 100 Chinese yuan ($14.6) every month from his bank in Taipei but has no plans to visit China. He plans to profit instead.

Huang and countless other Taiwan day traders known for their adventurism are buying the Chinese currency as an investment despite caution warnings because they expect it to appreciate any day, bank sources say.

'Mainland China is an increasingly viable new trade market, and the price used to be seven Taiwan dollars to one yuan whereas it's now about four to one, so I think the odds of it rising are pretty ominous,' said Huang, 27, a securities worker in Taipei.

Yuan deals over the past two months in Taiwan have escalated, causing some banks to run short of Chinese cash. The surge comes as foreign governments worried about their export competitiveness pressure economic powerhouse China to revalue its currency.

Yuan exchanges were legalised on the investment-crazy island only late last year when Taiwan and China allowed them as part of a flurry of trade pacts following decades of hostilities.

Taiwan's semi-official Central News Agency called recent yuan buying a 'shopping spree for the currency in anticipation of an appreciation this year' and said the 'fad' had led to shortages.

Purchases by individual Taiwanese account for most of the 120 million yuan sold every month by Mega International Commercial Bank, said Lee Hai-fong, a bank vice president.

Mega ran short of the red-and-white Mao Zedong-stamped cash in mid-April when Chinese President Hu Jintao met U.S. counterpart Barack Obama for talks that many expected to yield signals on when the yuan would appreciate, Lee said.

But resupplies are easy, as Taiwan banks can get more yuan from China, while profits for the punters are less certain.

'Customers can buy and sell as they like, but our judgment is that the yuan won't appreciate that much,' Lee said.

Unless the yuan rises by more than 2 or 3 percent as widely expected, bank service charges would cancel out any gains once yuan holders tried to sell back their cash, dealers say.

'It's pretty stupid if you buy it from banks,' one forex dealer with a foreign bank in Taipei said.

But Huang has massed 2,000 yuan and plans to save about 20,000 before thinking to resell it. Some of his family members have acquired about 40,000 yuan, he said.

'There should be a chance in Taiwan to sell it,' Huang said.

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