Strengths in China's yuan may boost grain prices

China's surprising move over the weekend signalling a new willingness to let its currency gain strength may give grain prices an initial boost this week, but recent adverse weather for world crops will be more important.

Analysts said Chinese and US weather are much more important to grain price direction in the week ahead.

In what was seen as a largely political move to deflect criticism of its fixed exchange rate ahead of the G20 meeting this week, China's central bank on Saturday (June 19) indicated it was ready to break a hard peg with the dollar that has come under intense criticism from the US and other countries.

Analysts said the exchange rate flexibility is presumably an effort to tame inflation, which have already been observed in their recent purchases of US corn. In other words, a stronger yuan benefits US agricultural exports.

Meanwhile, CBOT wheat and corn futures rallied to three-week highs on Friday (June 18) and soy traded around a one-month peak because of the turn to adverse crop weather. So analysts say there could be follow-through strength in the markets this week if harsh weather patterns persist.