China’s currency Yuan, also known as Renminbi, gets stronger against US dollar following US-China trade deal. It strengthens to a five-month high of 6.8661 per dollar on Tuesday, local news reported.
Accordingly, this rise is the currency’s strongest level since late July and early August last year. In addition, Reuters added that the yuan has rallied more than 2.5% since early December, thanks to the trade deal.
Reportedly, the rise happens for the elimination of US accusation over China as a currency manipulator. The accusation is, additionally, said to be untrue as China has never become a manipulator, Foreign Ministry spokesperson Geng Shuang said.
Regarding the rise, Jacqueline Rong, senior China economist at BNP Paribas in Beijing, believes that everything is according to the forecast.
“The highlight of the currency agreement was that both parties should respect the other’s autonomy in monetary policy, and this has relieved previous market concern that China might pledge to keep the yuan at a certain range and restrict its own monetary policy manoeuvre,” she said.
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The Rise of Yuan and US-China Trade Deal
Unlike Rong, an analyst from National Australia Bank does not share the same analysis. Senior Asia markets strategist Christy Tan argued that the rise of yuan is due to seasonal reasons, signifying that US-China deal has insignificant thing to do with it.
“It’s not like the trade war is over, done, dusted, and settled,” she said.
Hence, the escalation is reasonable for Lunar New Year, or Chinese New Year, is approaching. Demands from Chinese companies are mostly likely increasing for they need to convert their foreign currencies into bonuses for their workers.
She added that it will most likely turn back to normal soon for geo-political factors do not directly affect it. Tan also said that investors might be overly bullish on the trade deal.
Furthermore, she reminded the people that US tariffs on Chinese products are still there. Also, China still needs to make a huge purchase on US agricultural products. These factors will be highly influential.
