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MNI: Yuan Supported By Rebound But Firm USD Risks Move Above 7

MNI (Singapore)
(MNI) Beijing

The growth recovery should support a rally but wider interest rates spreads between China and the U.S. could see the 7 level tested, economists said.

True

The Chinese yuan is expected to be supported by the recovery in economic activity, but the possible renewed strength in the U.S. dollar risks pushing it above the closely watched 7 level and keeping the People’s Bank of China alert to any sharp moves in the currency, economists and traders told MNI.

The ongoing rebound in China’s economy was confirmed by stronger-than-expected PMI data on Wednesday, particularly robust new export orders, which triggered an inflow of around CNY7 billion of capital inflow into the A-share market and powered a rally that steered the dollar-yuan pair to below 6.9. The data dispelled the gloom about the recovery, which together with a jump in the U.S. Dollar Index, had driven the offshore yuan, or CNH, to a low of 6.9890 last month and within sight of the 7 level.

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The Chinese yuan is expected to be supported by the recovery in economic activity, but the possible renewed strength in the U.S. dollar risks pushing it above the closely watched 7 level and keeping the People’s Bank of China alert to any sharp moves in the currency, economists and traders told MNI.

The ongoing rebound in China’s economy was confirmed by stronger-than-expected PMI data on Wednesday, particularly robust new export orders, which triggered an inflow of around CNY7 billion of capital inflow into the A-share market and powered a rally that steered the dollar-yuan pair to below 6.9. The data dispelled the gloom about the recovery, which together with a jump in the U.S. Dollar Index, had driven the offshore yuan, or CNH, to a low of 6.9890 last month and within sight of the 7 level.

Keep reading...Show less