The Chinese renminbi has continued to strengthen overnight after USD/CNY broke back below the 6.5000-level at the start of the New Year. Market participants will be watching closely for any potential shift in stance towards China from the incoming Biden administration in the coming months. Renminbi weakness during President Trump’s time in power has already been reversed and economists at MUFG Bank expect the USD/CNY pair to move downward in 2021.
Key quotes
“The renminbi has been boosted overnight by the announcement from the New York Stock Exchange that it has backtracked on plans to delist three Chinese state-run telecoms groups as it no longer intended to carry out the de-listings ‘in light of further consultation with relevant regulatory authorities’.”
“The renminbi has already benefitted in part following the US election from building optimism that the Biden administration is likely to adopt a less combative approach towards China. It has helped the renminbi to extend its rebound against the US dollar as USD/CNY moves back closer towards the lows from early in 2018 at just below the 6.2500- level.”
“We expect the renminbi to advance further against the US dollar in the year ahead. A reduction in US-China trade policy tensions/uncertainty would create a more supportive backdrop for the renminbi while it should continue to benefit from relatively higher yields on offer in China and the cyclical outperformance of China’s economy.”
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