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Chinese Yuan Weak Against the US Dollar Despite Positive Economic Data

Chinese Yuan Weak Against the US Dollar Despite Positive Economic Data

Posted Tuesday, April 13, 2021 by
Arslan Butt • 1 min read

The Chinese yuan is exhibiting signs of weakness against the US dollar as markets turn cautious ahead of the release of the much awaited CPI report from the US later in the day, despite strong economic data releases from China earlier in the Asian session. At the time of writing, USD/CNH is trading around 6.55.

The US dollar had been making gains over the past few weeks over rising optimism about a rapid economic recovery, supported by multiple rounds of fiscal stimulus measures by the government, monetary easing by the Fed as well as a robust COVID-19 vaccine rollout program. Even as markets cheered the faster economic recovery and increased their bets on the greenback, mounting concerns about rapid recovery driving a surge in inflation sent US Treasury yields higher, driving further bullishness in the reserve currency against its major peers.

Despite the fundamentals indicating a similar story for China’s economic recovery and economic data releases also supporting the optimistic outlook, price action in the yuan remains more muted. Earlier today, China’s trade data release revealed an increase in exports during the month of March – a strong sign of recovery for the trade-reliant economy.

However, China’s economic outlook could get clouded by the repeated resurgence in fresh coronavirus cases across its key trade partners, especially Europe which remains under partial lockdown owing to the third wave of the pandemic. In addition, cases are on the rise across parts of Asia which heighten the possibility of fresh restrictions and lockdown measures being imposed, which in turn could weigh on global demand and keep China’s exports from increasing further and boosting its economic recovery in the near term.

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