Why did yuan mark the largest weekly profit since late 2020?

Economies.com
2022-05-23 12:03PM UTC

Yuan kept rising against dollar on Monday, marking three-week highs as the greenback slides against major rivals.

 

Yuan made the biggest weekly profit last week since November 2022, and we explain why.

 

USD fell 0.7% against yuan to 6.6840, a May 5 low, with the yuan marking a 1.5% profit last week, the largest such profit since late 2020.

 

Reasons include a weaker dollar, a stronger Chinese economic recovery, and short-covering after yuan plumbed two-year lows at 6.8375.

 

The Dollar

 

The dollar index fell 0.8% in the last session, marking three-week lows at 102.08 against major rivals, on active profit-taking off 20-year highs.

 

Disappointing US retails data dampened gains in the bonds market and flared fears of a recession.

 

Chinese Economy

 

China is starting to loosen up restrictions on movements in major cities as Covid 19 infections decline, while China's central bank took a bold move and cut interest rates to bolster economic activities.

 

Shanghai, a 25 million people city, is preparing to return to normal life by June 1.

 

Otherwise, the People's Bank of China cut five-year interest rates for loans by 15 basis points to 4.45%, the largest such decrease since 2019.

 

Estimates

 

Now analysts expect yuan to get back to 6.5 yuan per dollar if China delivered on lifting all restrictions soon.

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