The Chinese yuan has risen to an eleven month high following ongoing weakness in the US Dollar Index.
The US Dollar Index has seen sizeable declines across three consecutive trading days, edging lower 0.2% on 29 June to 95.823, which is its lowest point since October 2016.
The weak performance of the US dollar has greatly reduced depreciation pressure for the Chinese yuan, while a large accumulated volume of unsettled cash could further spur the upward momentum of the currency, as well as raise the likelihood of foreign reserve expansions.
The onshore RMB to USD rate has risen to an 11 month high of 6.7718, while the spread against offshore RMB has widened, with the later now at 6.7850.
Analysts from CICC expect the US Dollar Index to remain weak in the second half of 2017, potentially falling to as low as 95.
According to CICC the market has already factored US interest rate gains and balance sheet contractions into its forecasts, but has not done the same for the European Central Bank’s dialling back of quantitative easing,
While the US economy is already reaching a “mature” state from a growth perspective, the Eurozone will still be in a state of recovery during the second half, and there is a sizeable chance that growth will surpass expectations.