The yuan dipped to a two-week low on Thursday as brighter U.S. economic prospects continue to bolster the dollar, chipping away at the relative appeal of the Chinese currency.
SHANGHAI, March 25 (Reuters) – The yuan dipped to a two-week low on Thursday as brighter U.S. economic prospects continue to bolster the dollar, chipping away at the relative appeal of the Chinese currency.
Following a more than 6% surge in 2020, the yuan will likely move sideways against the greenback this year, reflecting America’s progress in vaccinations to bring COVID-19 under control, traders say.
Spot yuan CNY=CFXS changed hands at 6.5326 at midday, after touching the lowest level since March 9. Prior to the market open, the People’s Bank of China set the midpoint rate CNY=PBOC at 6.5282 per dollar, also a two-week low.
“The U.S. is expected to witness strong economic recovery post-COVID, and fundamentals will clearly lend support to the dollar,” wrote Tang Xiangbin, forex analyst at China Minsheng Banking Corp.
As a result, expectations for yuan appreciation will likely be weakened, shifting the currency back into the pattern of two-way fluctuations, Tang said.
Treasury Secretary Janet Yellen said on Wednesday U.S. banks look healthy enough to be allowed to resume paying dividends and repurchase stock, an updated view that reflects top economic officials’ growing confidence in the recovery from the coronavirus pandemic.
New York Federal Reserve Bank President John Williams also expressed optimism on Wednesday, saying the U.S. economy could recover more rapidly later this year as coronavirus cases drop and more people are vaccinated.
– Reuters