Yuan rebounds on Biden transition

Yuan rebound: An employee counts 100-yuan notes at a bank in Nantong in China’s eastern Jiangsu province. Yuan traders said investors are betting a Biden presidency could mean less uncertainty in US foreign and trade policy towards China.— AFP

SHANGHAI: The yuan rebounded against the dollar on Tuesday, after the Trump administration cleared the transition for US President-elect Joe Biden, with hopes of better relations between Beijing and Washington also underpinning a broad lift in sentiment.

Yuan traders said investors are betting a Biden presidency could mean less uncertainty in US foreign and trade policy towards China.

US President Donald Trump gave the head of the General Services Administration the go-ahead to proceed with a transition to a government led by Biden despite plans to continue with legal challenges.

On Monday, the yuan was pressured by the news that the Trump administration was looking to restrict 89 Chinese aerospace and other companies from buying a range of US goods and technology.

That marked the latest in a series of US actions, orchestrated by Trump, against China on trade, technology and geopolitics.

The onshore spot yuan opened at 6.5780 per dollar and was changing hands at 6.5829 at midday, 21 pips firmer than the previous late session close. “USD/CNH is expected to trade lower again towards the 6.50 level after the temporary adjustments amid concerns over the US-China relations, ” Qi Gao, FX strategist at Scotiabank, said in a note.

However, the yuan was stuck in a narrow range partly reflecting caution as the United States heads into Thanksgiving holiday this week, according to traders.

Overall, many analysts expect the continued economic recovery from coronavirus disruptions could further support the yuan.

“With the recovery seemingly well underway, policymakers have been comfortable allowing CNY to appreciate, ” Goldman Sachs said in a note.

“We expect this trend to continue over the coming year though at a slower pace, ” it added, expecting China to be the only major economy to post positive growth this year, with real GDP expanding around 2%.

Prior to market opening, the People’s Bank of China (PBoC) set the midpoint rate at a one-week low of 6.5809 per dollar, weaker than the previous fix of 6.5719. — Reuters

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