Yuan Ends At 2-week High; Biden Comments On Trade Deal Cap Gains
SHANGHAI, Dec 2 (Reuters) - The yuan ended its domestic session at a two-week high on Wednesday, reflecting broad dollar weakness in global markets, bắc kinh although gains were capped after U.S.
President-elect Joe Biden remarked he would not remove a trade agreement with China.
Biden told the New York Times that he would not immediately cancel the Phase 1 trade agreement that President Donald Trump struck with China nor take steps to remove tariffs on Chinese exports.
relations have been one of the key factors weighing on market sentiment and the yuan's performance since the outbreak of the trade war in 2018. Some investors had expected Biden to adopt a friendlier approach in his foreign policy and trade agenda towards China.
The onshore yuan pared some gains in the afternoon trade and finished at 6.5684 per dollar, bắc kinh the strongest close since Nov.
"The market was too optimistic and had expected the Biden administration to drop the tariffs," said a trader at a Chinese bank.
Traders said strength in the yuan on Wednesday was largely due to a weaker dollar, which hovered near a 2-1/2-year low.
Market expectations for further monetary easing by the U.S.
Federal Reserve and improving economic fundamentals in China could also allow the Chinese unit to rise further, they added.
Declines in the dollar overnight prompted the People's Bank of China (PBOC) to lift its midpoint rate by the most in nearly a month to 6.5611 per dollar, 310 pips, or 0.47%, firmer than the previous fix of 6.5921.
Wednesday's fixing was also the strongest since Nov. 19.
"The immediate target remains at the recent low around 6.5300, with the risk-reward favouring a break-out lower (for USD/CNH)," Terence Wu, strategist at OCBC Bank said.
The offshore yuan reversed earlier gains and eased to 6.5602 per dollar as of 0845 GMT, weaker than the previous close of 6.5520.
Still, economists and analysts expect continued economic recovery from coronavirus disruption in China could extend the yuan's recent rally.
"On the fundamental side, China's growth is likely to remain above-trend in the coming months," analysts at MUFG Bank said in a note, expecting the yuan to move in a range of 6.45 to 6.75 per dollar in December.
The Chinese currency started its appreciation trend in June and booked six straight months of gains, the longest such winning streak since late 2014.
It has risen nearly 9% to the dollar since late May. (Reporting by Winni Zhou and bắc kinh Andrew Galbraith; Editing by Sam Holmes and Ramakrishnan M.)