Chinese Yuan will appreciate very strongly in the coming months and years. Why? Because thats the main tool by which the Chinese central bank will fight inflation in China. The National Bureau of Statistics in China says that the consumer price index has increased by around 7 percent in January from a year earlier. The yuan will rally to 6.70 per dollar by the end of 2008, according to the median estimate of 26 analysts surveyed by Bloomberg News. Forward contracts show traders are betting on a 12 percent advance in the yuan to 6.3150 in the next 12 months.

Van Eck Global has launched currency exchange-traded notes offering exposure to the Chinese renminbi and also the Indian rupee. The Market Vectors – Chinese Renminbi/USD ETN (NYSE Arca: CNY) is the first exchange-traded products to offer exposure to the Yuan.

The notes are designed to go up in value when the Yuan/Rupee appreciates against the U.S. dollar, and down when the dollar strengthens. The ETNs are underwritten by Morgan Stanley, and Van Eck is the agent. The notes charge 0.55% in annual fees.

Buy them in tax-sheltered accounts. Marc Faber and Jim Rogers have been bullish on the Yuan for sometime. There is consensus that the Yuan is undervalued and will need to rise in the months and years ahead. With no real attractive bull markets in US equities, this trade can garner good returns.