Yuan Strengthens Against Dollars As Yuan Leads Charge In Risk-On Trades

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China’s yuan rose to a four-month high against the greenback, extending recent gains as investors of all stripes increase positions in Chinese stocks due to growing signs of a recovery in the world’s second-largest economy.

Also, Oil edges lower as United States inventory build stokes supply fears.

Lingering worries about the spread of the coronavirus could keep some currency pairs in a tight range, but the dollar’s losses are gradually increasing as sentiment favours riskier bets on long-term economic growth.

“Rising stocks and a dip in Treasury yields are slight negatives for the dollar, but the market can’t move too far because we still have to worry about the virus,’’ said Minori Uchida, Head of Global Market Research at MUFG Bank.

“A lot of major United States economic data have been positive, so this will be less of a trading factor going forward.

“People are looking for cues from stocks, yields and hedging costs.’’

Against the euro, the dollar fell 0.3 per cent to $1.1365, reaching a one-month low.

The euro could get a further boost later in the day as Germany is scheduled to release export data.

Economists expect shipments from the euro zone’s largest economy to rebound sharply in May from a large decline in the previous month.

The greenback also fell to a three-week low against the pound at $1.2637.

Sterling edged up to 89.97 pence per euro EURGBP=D3.

The dollar fell to a four-month low of 0.9365 Swiss francs on Thursday.

The dollar was little changed at 107.27 yen.

Chinese shares continued their recent rally and surged to a five-year high during the Asian session.

Futures pointed to further gains in European equities, highlighting the enthusiasm for risk-on trades.

Investors are also looking to United States weekly jobless claims later on Thursday, but the dollar looks set to remain on the back foot until then.

The onshore yuan burst past the closely watched level of seven to reach an almost four-month high of 6.9820 per dollar.

China’s currency has been a star performer as investors shrug off diplomatic tension between Washington and Beijing to focus on China’s improving economy and its attractive technology sector.

The yuan has risen around 2.7 per cent from a seven-month trough against the dollar set on May 27.

While some investors are reluctant to take big positions before the traditional summer holiday season amid uncertainty around the coronavirus pandemic, analysts said sentiment favours more United States dollar declines.

This is as investors try to look past a recent spike in coronavirus cases in some countries.

Elsewhere in currencies, the Australian dollar (AUD=D3) rose to a one-month high at $0.695.

Highlighting the greenback’s woes, the New Zealand dollar (NZD=D3) rose to $0.6590, the highest since late January.

Source: AIB

Edited by: Abdulfatah Babatunde 

29 thoughts on “Yuan Strengthens Against Dollars As Yuan Leads Charge In Risk-On Trades

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