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Yuan is growing, as China needs a strong course towards negotiations

Yuan is growing, as China needs a strong course towards negotiations

Jim Anderson - Public Relations

The yuan rose after the Central Bank of China set daily fixing at a level stronger than expected by the market for the fifth consecutive time. The People’s Bank of China fixed the exchange rate at 7.0312 per dollar on Wednesday, breaking the nine-day lull after US President Donald Trump decided to postpone the introduction of the new tariffs on a wide range of Chinese goods until December.

The delay in the introduction of a 10% tariff on consumer goods, including toys and laptops, occurred after senior US and Chinese trade representatives spoke on the phone. Trump said the conversation was “productive” and that the delay was made “so that it would not hurt the Christmas shopping season”. The offshore yuan rose 1.6% yesterday on this decision.

“The fixing turned out to be much stronger than expected, probably because China needs to stabilize the yuan and prevent a steady devaluation before resuming trade negotiation”, said Scotiabank currency strategist Gao Qi, adding that on the continent, the currency is likely to trade between 6.9 and 7.1 for a dollar if there isn’t any important news about negotiations.

If trade tension increases, there is a 20% chance that the NBK could push the yuan in the direction of 7.5 per dollar, wrote BNP Paribas analysts Chi Lo in a note to clients.