Yuan climbs to 2017 high as US dollar softens after Trump says the currency is ‘too strong’

PUBLISHED : Tuesday, 17 January, 2017, 7:58pm
UPDATED : Tuesday, 17 January, 2017, 10:05pm

The yuan rose to its highest level of 2017 on Tuesday afternoon as the US dollar weakened against all major currencies, 80 hours ahead of Donald Trump’s inauguration as the new US president.

The onshore yuan traded in Shanghai rose 0.62 per cent or 430 basis points to close at 6.8560 yuan per US dollar on Tuesday, the highest of the year and the strongest in a month.

Offshore yuan traded in Hong Kong rose to 6.8086 at 6:30pm on Tuesday, up 0.73 per cent from Monday, or 498 basis points. This is just shy of the year’s high of 6.7829 set on January 5.

The yuan’s surge came as Donald Trump lambasted the US dollar as too strong in an interview with the Wall Street Journal.

“Our companies can’t compete with them [Chinese companies] now because our currency is too strong. And it’s killing us.”

Jasper Lo, chief strategist of King International Futures, said the yuan strengthen alongside other major currencies amid strong selling pressure on the US dollar.

“The US dollar has risen substantially in the past two months after Donald Trump was elected as US president as many expects his policies would lead to more interest rate tightening and hence strengthen the US dollar. Some investors have started to take profits, which has led to the sharp fall of the US dollar against other currencies including the yuan,” Lo said.

Lo said an interest rate hike would be likely be delayed until after June.

“In addition, Trump’s trade policy against China has led to many worries about a global trade war. Many investors are now starting to sell the US dollar in favour of gold or other currencies,” he said.

“Currencies traders are also eyeing British Prime Minister Theresa May’s comments about Brexit in a speech later Tuesday night Hong Kong time. The pound may be volatile tonight,” he said.

On Tuesday, the pound bounced back 0.78 per cent to buy US$1.2138 at 6:30pm, after the currency fell to a 32-year low on Monday at US$1.2043, down 1.09 per cent on the day.

The Japanese yen and euro both rose to one -month highest against the US dollar on Tuesday. The yen traded at 113.26 yen per US dollar, up 0.83 per cent, which is the highest since mid November.

The euro also rose 0.58 per cent to US$1.0665, its highest since mid November.

Gold was also a safe heaven, Lo said as the price shot up more than 1 per cent US$1,213.80 per ounce on Tuesday.