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Monday, January 13, 2020, 13:01
China's yuan at strongest since July amid trade deal optimism
By Bloomberg
Monday, January 13, 2020, 13:01 By Bloomberg

Headquarters of the People's Bank of China (PBOC), the central bank, is pictured in Beijing, Sept 28, 2018. (Photo / VCG)

China’s yuan strengthened to a five-month high, punching past 6.9 per dollar ahead of this week’s planned trade-deal signing with the US.

The currency rose as much as 0.32% to 6.8968 versus the greenback in the onshore market on Monday, the strongest since July 31. The offshore rate gained 0.27% to 6.8963.

The yuan’s outperformance since last week has reflected the improving risk sentiment, thanks to signs of the economy bottoming out

Tommy Xie, Economist at Oversea-Chinese Banking Corp

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China’s economy has shown signs of recovery in recent months as global demand steadies and trade tensions ease, boosting investor sentiment. The US and China are scheduled to sign their “phase one” trade deal on Wednesday. Domestic stimulus efforts and expectations for further monetary easing are also helping to buoy risk assets.

“The yuan’s outperformance since last week has reflected the improving risk sentiment, thanks to signs of the economy bottoming out,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “While there’s no obvious catalyst today, there’s some speculation that China may get a better trade deal than expected.”

Chinese Vice-Premier Liu He will lead a delegation to Washington to sign the first phase of the trade deal with the US from Jan 13-15, according to the Ministry of Commerce.

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The yuan has strengthened since early December as US-China trade talks progressed. China’s currency weakened past the key 7 per dollar level for the first time in a decade in August, when tensions between the two nations escalated.

“Nobody wants to take a short CNH position for now, which explains its strength,” said Hao Zhou, senior emerging markets economist at CommerzBank AG in Singapore. “We will need some time to see whether USD-CNH would be consolidating at this time, which in my view is probably the case.”

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