The announcement by China that they'll float the yuan against the U.S. dollar has caused shares in in Alcoa (NYSE:AA) and Century Aluminum Co. (Nasdaq:CENX), among other commodity companies, to surge today, based on the assumption the yuan will appreciate as a result.
This would of course help commodities which are traded in U.S. dollars.
With China by far the largest importer of a larger number of commodities, it would be beneficial for many companies, which would have their margins and earnings increase as a result.
The other side of the equation which no one is talking about today because of the temporary euphoria, is the consequences to these same companies if the yuan depreciates in value against the U.S. dollar, which would have the opposite effect.
The market believes this won't be the case, and until proven otherwise, in the near-term should help metals producers in general.
Alcoa was at $11.88 a share, a gain of $0.77, or 6.93 percent, as of 1:45 PM EDT, while Century Aluminum rose to $10.86, a gain of $0.82, or 8.17 percent, as of 1:45 PM EDT.
1 comment:
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