By Anant Thawatchaipracha
9 July 2010 – Natural rubber could gain from China’s potential higher import demand arising from a strong yuan, the ANRPC said in its June bulletin released recently.
China accounted for about 37% of the global demand for natural rubber in 2009. Out of the total volume of 3.040 million tonnes of natural rubber consumed in the country in 2009, as much as 2.614 million tonnes or 86% was sourced from abroad.
In its comments over China’s announcement on 19 June that it would allow more flexibility in the exchange rate of the yuan, the ANRPC said that although the movement was likely to be gradual, over time, yuan is expected to appreciate against the US dollar.
It further added that a stronger yuan, while making exports less competitive, helps in making imports less expensive thereby promoting more import of raw materials. The new policy therefore would be more oriented towards making the Chinese economy less dependent on exports and more dependent on domestic consumption, helping the country leass vulnerable to external shocks.
There is then the potential influence on other Asian currencies. China’s potential higher import demand is likely to prompt investors to currencies such as Thai Baht, Malaysian Ringgit and Korean won, which are seen as proxies for China’s growth.
The yuan’s gains on 21 June led to appreciation of these Asian currencies against the US dollar and this indicates the possibility of bigger currency movements in the rest of Asia, including Thailand and Malaysia, which are China’s two major trade partners in sourcing natural rubber. A stronger exporting country currency generally helps natural rubber prices to rise in US dollar terms.
(Irco.biz)
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