The Chinese yuan rose to a 16-month high in both onshore and offshore trade. It is thanks to China’s robust economic fundamentals.
In August, industrial output accelerated the most in eight months. Meanwhile, this year, retail sales grew for the first time. It suggested the economic recovery gathers pace as demand begins to improve more broadly from the coronavirus crisis.
Ei Kaku works at Nomura Securities. He is a senior strategist there. He said that they have evidence of strong exports from China. Nevertheless, Chinese tourists, who would have spent $260 billion overseas in standard years, will not go abroad this year. Thus, it reduces the selling of yuan.
The strength of the Chinese yuan helped to lift MSCI emerging market currency index to a six-month high.
The United Kingdom government won an initial Parliamentary vote on its controversial bill to violate the Brexit deal with the European Union. The British pound showed a limited reaction to it. Following a fall of 3.66% last week, the British pound bounced back to $1.2855.
Chinese Yuan and Others
The selling of yuan declined.
Nevertheless, traders say that the currency looks vulnerable. It is because the European Union warns British Prime Minister Boris Johnson’s bill will collapse trade talks. Moreover, it will propel the United Kingdom towards a messy Brexit.
Now, investors are looking to central bank policy meetings in Britain on Thursday and in the United States on Wednesday and in Japan on Thursday.
Since Chairman Jerome Powell unveiled a shift toward greater tolerance of inflation, this week’s Federal Reserve meeting will be its first meeting. The shift effectively pledged to keep interest rates low for longer.
There are projections from the Federal Reserve’s policymakers that inflation will remain below two percent in their economic forecasts. Nevertheless, it will be extended to 2023 this time. It can strengthen estimates that interest rates will stay low for an extended period. That is what analysts say.