The US Dollar is trading against the Chinese Yuan at a rate of 6.68 at the beginning of election day. The pair has an open rate of 6.68 and a previous close at 6.69, the YTD return stagnates at -4.00%. USD/CNY 52-week rate currently ranges between 6.64-7.17.
CNY is rebounding slowly but is prepared for market changes once a new president has been selected. Former Vice President Joe Biden is leading the latest polls but “traders are not completely confident after most polling firms failed to accurately predict the 2016 election.”
With a -0.17% drop, USD/CNY anticipates the yuan to perform well as FY21 approaches due to China’s experimentation with a digital currency that is being monitored by foreign exchange market observers.
The governor of the People’s Bank of China (PBoC) Yi Gang, confirmed that “the pilot program to roll out a digital version of the yuan has been so far successful.” According to the head of the central bank, “there have been four million transactions, worth approximately $2 billion.”
Since May USD/CNY has dropped by 7%, the success of CNY can be attributed to higher interest rates compared to the US, as well as the Chinese government having better control of COVID-19.
The National Bureau of Statistics reported that the manufacturing purchasing managers’ index (PMI) reading in October was at 51.4, down from 51.5 in September which was better than the estimated 51.3.
Non- manufacturing PMI rose to 56.2 in October, up from 55.9 in September, “this was the fasted growth rate in the services sector since October 13, driven by an improvement in new orders.” Private sector PMI readings jumped to 53.6 last month compared to 53.0 in September.
A strong CNY benefits the global economy as the currency makes it cheaper for foreign companies to sell their goods on the Chinese market which boosts export growth in economies like Germany and Asia, even Latam which supplies a lot of raw material to China.
“A stronger CNY also defuses criticism in the US that China is trying to gain advantage from a cheap currency, reducing the risk of adverse restrictions on trade with China” according to FX Street.
By Surina Nath