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Yuan hits 7-month high; Aussie, Kiwi also gain

London

CHINA'S yuan touched a seven-month high and the commodity-linked Australian and New Zealand dollars gained on Monday after US President Donald Trump confirmed he would delay a planned hike in tariffs on Chinese imports. Mr Trump said on Sunday that he would push back a March 1 deadline after trade talks between Washington and Beijing made "substantial progress".

Chinese equities surged as investors and European shares also performed well. The offshore yuan rose as high as 6.6737 per US dollar to touch its strongest since mid-July and was up 0.3 per cent at 6.68 by 1020 GMT. China's yuan has strengthened 2.7 per cent against the US dollar in 2019, reversing some of its 5.5 per cent loss last year.

"There was a huge risk premium in the renminbi that is being priced out," said Esther Reichelt, Frankfurt-based FX strategist at Commerzbank. News of the postponement was "not that much of a surprise" as the market had already been factoring in reduced China-US trade tensions.

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The Australian dollar, seen as a proxy for China risk because of Australia's dependence on Chinese demand for its exports, rose more than half a per cent to US$0.7181. The New Zealand dollar gained 0.8 per cent to US$0.6902, its best since Feb 6. The euro gained against a weaker US dollar, adding 0.3 per cent to US$1.1363, keeping it within recent trading ranges.

The dollar index, which measures it against a basket of other currencies, fell 0.2 per cent to 96.333 as investors bought currencies considered riskier.

With the US dollar weaker and optimism improving, emerging-market currencies also rose, with the rand strengthening more than one per cent and the Mexican peso and Russian rouble following closely behind.

Concern about Chinese growth and global growth have weighed on sentiment in recent months, although 2019 has also seen a rally in risk assets after the US Federal Reserve paused in its interest rate increases.

Sterling held below US$1.31, up 0.2 per cent, as traders considered whether the British government might delay Brexit should Prime Minister Theresa May fail to secure support for her withdrawal agreement.

Mrs May has put off a vote on her Brexit deal until as late as March 12 - 17 days before Britain's official departure date from the European Union, exacerbating fears of a disruptive no-deal Brexit.

The Japanese yen was unchanged against the US dollar at 110.71 yen per US dollar. REUTERS