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Why is the Chinese yuan strengthening against the dollar?

Summary:
Over the past six months, the dollar has depreciated relative to the Chinese yuan, falling from 7.1 yuan to only 6.85 yuan, a 3.5% decline.  It may be that Chinese citizens (who have high savings rates) are more reluctant to invest in the US or to hold their savings in dollars.  The strong yuan is hurting China's recovery:China’s currency has climbed more than 5% from this year’s low in May, the best performance in Asia. A strong yuan is an obstacle when the nation’s economy is recovering from the coronavirus pandemic and confronted with escalating tensions with the U.S. because it could undermine the attractiveness of exports.The yuan’s gain versus its trading partners’ currencies is smaller compared with its move against the dollar. The Bloomberg CFETS RMB Index Tracker, which measures

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Why is the Chinese yuan strengthening against the dollar?
Over the past six months, the dollar has depreciated relative to the Chinese yuan, falling from 7.1 yuan to only 6.85 yuan, a 3.5% decline.  It may be that Chinese citizens (who have high savings rates) are more reluctant to invest in the US or to hold their savings in dollars. 

China’s currency has climbed more than 5% from this year’s low in May, the best performance in Asia. A strong yuan is an obstacle when the nation’s economy is recovering from the coronavirus pandemic and confronted with escalating tensions with the U.S. because it could undermine the attractiveness of exports.

The yuan’s gain versus its trading partners’ currencies is smaller compared with its move against the dollar. The Bloomberg CFETS RMB Index Tracker, which measures the yuan versus 24 peers, has risen just 2.4% from a record low last year. The gauge currently stands at 92.95.



 

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