A major sticking point in US-Sino relations, particularly since President Obama announced his plans to boost industry here in the US, is that Chinese authorities keep a tight lid on the local currency known as the renminbi, or the yuan. In fact, Congress recently threatened to label China a currency manipulator to justify protectionist tariffs and quotas to keep Chinese goods out of the US market.

Chinese authorities continue to maintain that the government doesn’t manipulate exchange rates.

But after years of an artificially low peg, the Chinese have pledged to allow the yuan to appreciate gradually and to reform its exchange-rate policies to make the currency more flexible. This news triggered a positive reaction in US markets, as investors contemplated the benefits that would accrue to Western companies doing business in the country.

A stronger renminbi would enable Chinese consumers to purchase more foreign goods, potentially boosting the bottom line particularly of Western exporters.

And a flexible foreign-exchange policy would help China control inflation and the formation of asset bubbles. It would also facilitate the economy’s transition to one driven by domestic consumption rather than exports.

This news has sparked interest in WisdomTree Dreyfus Chinese Yuan (NYSE: CYB), which has enjoyed a huge uptick in volume and attracted millions of dollars of assets.

A trade on an appreciating yuan appears to be a no-lose bet after China’s recent policy announcement.

With assets of just under $725 million and an expense ratio of 0.45 percent, WisdomTree Dreyfus Chinese Yuan is the cheapest yuan play on the market. Market Vectors Chinese Renminbi/USD (NYSE: CNY) carries an expense ratio of 0.55 percent–an odd situation in a market where exchange-traded notes are usually the cheapest option available.

Prospective investors should be aware that the fund primarily uses futures to gain currency exposure, as well as treasury bills, swaps and repurchase agreements. Accordingly, the fund’s performance is largely predicated on future expectations for the currency’s performance rather than short-term moves. And the transition to a floating-rate currency will be months, if not years, in the making.

The bottom line: Avoid the temptation to try to bet on the renminbi through ETFs–it’s likely a losing proposition.

What’s New

It’s been a busy year for ETF launches, but no new funds come to market in the past week.