U.S. Dollar Ends Week Down Against Yuan

U.S. Dollar Ends Week Down Against Yuan

The U.S. dollar concluded the trading week down against the Chinese currency after Beijing attempts to stem currency outflows from the country, in an effort to prevent further reductions in the value of the yuan.

Beijing has implemented new mechanisms of preventing currency outflow from China, most notable of which are increased controls on outbound investments made by Chinese companies, as well as a distinct overall of regulations regarding the conversation of yuan into foreign currencies. In a practise designed to achieve more agreeable rates, some Chinese investors borrow yuan, prior to swapping them for dollars and once more converting them into yuan at a more favourable rate.

Currency regulations imposed by Beijing pushed the dollar down to 6.84610 from a peak of 6.98750 in the first trading week of 2017, marking a considerable loss considering the significant increases made by the dollar against the Chinese currency throughout much of 2016. With steady rises apparent in trading weeks through October and November, prior to a plateau in the concluding trading sessions of the year.

Many analysts remain sceptical however regarding the capacity of the Chinese government to effectively reduce long-term currency outflow, and many consider the recent drop in dollar value concerning the yuan to be a temporary anomaly rather than a prolonged trend. However, with the inauguration of Donald Trump and uncertainty expressed regarding the economic direction to be assumed under the new U.S. administration, many are settling into an interpretation of continued dollar depreciation.

It is the former view which carries more support however – with many maintaining bullish bets on the U.S. dollar against the Chinese yuan.

Chart from: https://www.dailyfx.com/usd-chn 

Showing weekly fluctuations in value of U.S. dollar / Chinese yuan.

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