While analysts say the exchange rate is being driven by improving market sentiment as China’s economy steadies and trade tensions ease, the recent bout of strength comes at a pivotal time for U.S.-China negotiations. Chinese Vice Premier Liu He is expected to sign the long-awaited phase one agreement in Washington Wednesday.
Some now predict the currency will touch 6.8 per dollar within three months -- a level not seen since May last year.
“Having a stronger currency is one way to show good will,” said Mitul Kotecha, a senior emerging-markets strategist at Toronto-Dominion Bank in Singapore. “Signs of a gradual, as opposed to rapid, slowdown in China’s economy and limited decline in China rates will provide support to the currency.”
I did not think we were going to see the Renminbi trade stronger than the trend mean but it is now clearly breaking out. That is as much about the willingness of China to tolerate a stronger currency as it is about the supply of Dollars resulting from the ongoing repo operations.Click HERE to subscribe to Fuller Treacy Money Back to top