The offshore stages biggest rally since August

The phase-one trade deal offers an end to the tension that has roiled markets this year
Chief Investment Office13 Dec 2019
Photo credit: AFP Photo

The offshore Chinese yuan staged its biggest rally in more than four months on Thursday (12 December) as the US reached a trade agreement with China, paving the way to at least a temporary end to tension that has roiled markets all year.

The yuan advanced 1.2% to 6.9457 per dollar, the highest since 31 July after trimming a gain of as much as 1.5% and revisiting its 200-day moving average for the first time since July. The Chinese currency at one point squeaked past the key 7.00 key level last breached in August – ironically, after US President Donald Trump threatened to raise tariffs on Chinese goods as talks stalled.

Trump signed off on a so-called phase-one trade deal, averting the 15 December introduction of a new wave of US levies on about USD160b of consumer goods from the Asian nation, Bloomberg News reported. The US has added a 25% duty on about USD250b of Chinese products and a 15% levy on another USD110b of its imports over the course of a roughly 20-month trade war.

The onshore yuan, meantime, closed at mid-morning New York time 0.15% higher, at 7.028 per dollar, just after news had broken that an agreement was nearing completion but before Trump signed off on it. That means it will probably surge when Asian markets open on Friday.

Traders will also eye the daily yuan fixing at 9:15 am Friday Beijing time from the People’s Bank of China for potential policy signals. The reference rate was set at 7.0253 per dollar on Thursday and has stayed weaker past 7 level since 12 November. – Bloomberg News.

The US Dollar Index (DXY) gained 0.33% to 97.397 on Thursday, the euro was flat at USD1.1130, the pound fell 0.27% to USD1.3161, while the yen declined 0.69% to 108.31 per dollar.

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