Yuan makes biggest daily swing since 2015 as US poll results from Arizona to Wisconsin sets outcome on roller coaster course

Offshore yuan climbed by as much as 0.9 per cent in late trading Wednesday to 6.6202 per dollar, its strongest level since July 2018, after earlier falling as much as 1.4 per cent

That was the biggest intraday swing since the day after Beijing devalued the currency in August 2015

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An advertisement promoting China's renminbi (RMB), US dollars and euros at a money changer in Hong Kong on July 26, 2011. Photo: Reuters

Published: 10:31am, 5 Nov 2020Updated: 11:58am, 5 Nov 2020

China’s yuan is emerging as one of the most sensitive assets to the outcome of the US presidential elections.

The offshore yuan climbed as much as 0.9 per cent in late trading Wednesday to 6.6202 per dollar, its strongest level since July 2018, after earlier falling as much as 1.4 per cent.

That was the biggest intraday swing since the day after Beijing devalued the currency in August 2015. The currency’s one-week implied volatility – a proxy for market risk – fell from a record high, while traders reduced their hedges against yuan weakness.

The offshore yuan is particularly sensitive to the election outcome given that some analysts view a Biden administration as potentially more moderate - or at least more predictable - toward China in the trade war. The Democrat won Michigan and Wisconsin Wednesday, putting him on the brink of taking the White House from President Donald Trump.

“Now, the market will focus back on fundamentals, and the fundamentals for the renminbi are very strong,” said Dariusz Kowalczyk, senior emerging-markets strategist at Credit Agricole CIB, citing capital inflows and China’s economic recovery as key supportive factors. “As soon as the election is called for Biden, and as soon as it’s clear that he won, we are going to break 6.6.”

Chinese President Xi Jinping and then vice president Joe Biden at a welcoming ceremony for the Chinese delegation at the Andrews Air Force Base, in Maryland on Thursday, September 24, 2015. Photo: AP

China’s currency is one of the best performers in Asia in the past six months, with the offshore rate rallying 7.5 per cent against the US dollar, as the country’s economy rebounded from the effects of the coronavirus and attractive yields drew inflows.