Yuan Strengthens after Inflation Data; Dollar to Remain Robust
On Monday, the Chinese yuan inched higher on the back of stronger-than-expected local inflation data.
However, a robust jobs report on Friday has connected with weaker economic numbers in Europe. It means that the U.S. dollar is on the expectation to stay strong in the near term.
Moreover, the USD/CNY pair traded at 6.9810, 0.26%, softer in the FX Market. It is after tumbling as low as 6.9774 earlier Monday.
Meanwhile, the U.S. Dollar Index that tracks the greenback versus a basket of six other currencies was dull at 98.66. It was off the highs, as seen last October.
Earlier Monday, China’s producer prices grew by 0.1% year-on-year, which was the first pickup ever since May 2019.
The numbers that followed a 0.5% decline in December were in line with prospects.
However, consumer prices also inched up 5.4% year-on-year compared with an anticipated 4.9% increase and a 4.5% growth in December.
On Monday, the National Bureau of Statistics stated, “The year-on-year increase has been affected not only by Spring Festival-related factors but … by the new coronavirus as well,” it is with prices of pork and fresh vegetables driving up the expenses.
The uptick may perhaps complicate decision making for officials who are exploring to lift a cooling economy.
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Further Forex Market Movements
An analyst at Saxo Bank, Eleanor Creagh, said, “China’s policy responses have been stepped up over the past week with liquidity injections helping to allay some investors’ fears.”
Creagh added, “However, these increased policy responses signal the authorities anxiety levels are rising, despite the state media awash with proclamations to the contrary.”
On some forex trading, the EUR/USD pair traded 0.1% greater at 1.0952. It goes along with the GBP/USD pair that traded 0.2% better at 1.2914.
The stated pair was earlier below at 1.2876, and it is the smallest since late November.
In another statement, the U.S. dollar generally remains well bid, Creagh indicated.
Moreover, “With this USD strength comes an additional hit to growth as the strong USD tightens financial conditions globally, particularly in offshore funding markets.”
Lastly, “The strong dollar hinders reflationary pulses and curtails green shoots, therefore, cementing the path for weaker economic growth.”
Elsewhere, stocks slipped across the Asia Pacific at the same time. The matter happened as investors remained trying to gauge when economic activity might bounce back after the hit from the coronavirus.
Benchmarks in Hong Kong, Shanghai, Tokyo, and Seoul inched lower. It is even though moves eased in the wake of a report that Apple Inc’s leading manufacturer got a green light to continue some production.
Moreover, the Australian dollar rose, and the yuan soared by past 7 per dollar offshore. Treasuries were dull, while oil traded around $50 a barrel in New York.
