Yuan surges to 16-month high on economic data

London

RISKY currencies gained on Tuesday, with the yuan strengthening to a 16-month high after Chinese data pointed to an economic recovery and the Australian and New Zealand dollars climbing, while the US dollar fell.

China's industrial output accelerated and retail sales grew for the first time this year, beating analysts' forecasts, data overnight showed.

The yuan surged in both offshore and onshore trading. The offshore yuan carried on strengthening throughout the European session, hitting new 16-month highs of 6.7685 versus the US dollar at 7pm, Tuesday, Singapore time.

The Australian dollar rose after minutes of its central bank meeting showed no signs of a further cut to record-low interest rates. At 7.11pm, Tuesday, Singapore time, it was at 0.73355, up 0.6 per cent on the day.

The New Zealand dollar was up 0.4 per cent versus the US dollar, while the Canadian dollar rose around 0.2 per cent.

"It's a proper risk-on day today," said Kit Juckes, head of FX strategy at Societe Generale.

"There's a sense that the virus is less of a threat in China now, and also perhaps more widely the market is looking for a more V-shaped global economic recovery," he added.

The Swedish crown was up around 0.2 per cent at 8.7425, while the Norwegian crown fell around 0.1 per cent, taking a hit as oil prices extended their fall.

The US dollar slipped, although it recovered some of its overnight losses in early London trade, leaving the dollar index 0.3 per cent lower on the day at 92.801.

The market is looking ahead to the Federal Reserve's two-day policy meeting starting on Wednesday.

"Another good August industrial production figure out of the US today should maintain the positive mood going into tomorrow's FOMC meeting," ING strategists wrote in a note, adding the dollar index could still drift down to 92.50.

The euro was up 0.3 per cent versus the US dollar at US$1.1895.

Investor sentiment in Germany rose in September, despite headwinds from Brexit and rising coronavirus infections, the ZEW economic sentiment survey showed.

The pound rose after better-than-expected jobs data.

The positive sentiment in currency markets was also attributed to hopes for a Covid-19 vaccine. British drugmaker AstraZeneca restarted its vaccine trial in Britain on Saturday though it remains on hold in the United States. REUTERS