How does CNY devaluation influence worldwide trade in loose diamonds and diamond prices?
Devaluation of the CNY has effect on the USD, find out what it means for the diamond prices
The loose diamond industry is operating worldwide which makes it logical that some countries push it more than others. Now there has been a sudden depreciation of the Chinese Yuan, which results in the looming of the U.S. interest rate, what does this mean for the diamond prices?
Last week the Zhou's People bank of China allowed the CNY to depreciate by about 3.5%. Which means that the currency is now trading against the USD for around CNY 6.4. Resulting in the fact that it is more expensive for Chinese buyers to import loose diamonds if the currency is USD for importing the goods. The diamond prices of the loose diamonds have not changed on the diamond wholesale market, it is only more expensive for the Yuan to buy from Dollar base due to the deprecation of the CNY. According to Michael Huang, the dealers in China are raising their diamond prices with almost 5% to compensate the currency loss. This raise in diamond wholesale prices in China is will mostly be felt by consumers buying retail diamonds in the coming weeks.
Since Chinese buyers are one of the larger groups that buy diamonds, experts are expecting to see more loose diamond purchases to be done outside China to avoid the increased diamond retail prices. However, the score of Chinese tourist that will go abroad to buy luxury goods and diamond jewelry will get lower. The buying power of the Chinese tourist is not as strong as before since they have fewer dollars to spend. Sounds quite depressing for the diamond industry you think? But it is not bad at all because the CNY and stock market's volatility affects to deflation of real estate, which increases the investment, favour of loose diamonds and gold. In addition, lots of investors are counting their losses in money that they have put in the stock markets these past two months.
So the result of this situation is that more people shift their investment to diamonds since that's a solid and safe investment based on demand and supply and not currency drops or jumps. So this situation is not as depressing as you think and can even encourage the major Chinese buyers to invest more in quality products such as loose diamonds and diamond jewelry.
Published on August 23, 2015 by Diamond Registry
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