The recent emergence of market - changing data in relation to the Chinese economy has caused forex traders to pay special attention to the Asian nation and its trading patterns. Other G20 countries are also falling under the watchful gaze of forex traders who are keen to stay ahead of the curve when it comes to tracking international events and their potential impact on the currency pairs they are trading.

As recent forex news reports have shown, China is one of the few nations currently experiencing economic growth. This has inevitably resulted in reliance from other countries in the expanding Chinese economy.

Kathy Lien, (pictured) Director of Global Research and Analysis, GFT, Managing Partner at BKForex Advisors shares her thoughts on the importance of the Chinese market and how traders can maximise on any volatility.

“So, lately, we’ve been seeing some nice upside surprises in Chinese economic data, and in the middle of February, we saw the Chinese government cut the reserve requirement ratio, which basically meant that they’re putting more money into the hands of banks so they could lend.

“That’s really good news for all risky currencies, such as the Australian dollar (AUD), the New Zealand dollar NZD), and the Canadian dollar (CAD). It’s really good for stocks, and currencies are correlated to stocks. It means that China is going to avoid a hard landing. At worst, we’ll get a soft landing, and we may even get 8% GDP growth this year if we’re lucky.”

“More stimulus could be on the way, and I think that should make people feel a little bit more comforted in terms of the global risk environment.”

Unsurprisingly, as China continues to snap at the heels of the US dollar on its path towards becoming the world’s reserve currency, traders are already considering the impact of a stronger Chinese yuan on the USD.  

"An appreciation of the yuan against the dollar would indeed reduce the U.S. trade deficit with China, but it is unlikely to have a major effect on U.S. job creation," said Eswar Prasad, a former International Monetary Fund official who now teaches international trade policy at Cornell University in New York.

Meanwhile in China, forex analysts suggest that the likelihood of a stronger yuan will reduce economic growth and increase unemployment in the country. The extent to which these downsides would occur is the question many economists are yet to agree upon.

Forgetting about the bigger picture - having read the news and done your research at the beginning of a trading day, how should you go about trading on China with G20 currencies?

Lien adds: “I think the best way to trade this in terms of the G20 currencies is that when the news comes out, there is a very good chance that you’ll see a rally, and the Australian dollar is one of the biggest beneficiaries. Also, the New Zealand dollar.

“You can either trade in anticipation of the news, or after the news is released, because as I mentioned, they are expected to do a lot more this year, so it should just be a matter of time before more action follows.”