The Chinese yuan up has gained more than 1% this month, having hit a 16-month peak last week rising 0.2% to 6.7681 per dollar. It has been helped by foreign purchases of Chinese bonds which flooded in as FTSE Russell is expected to include China in its World Government Bond Index on Thursday, triggering inflows and supporting the currency. Foreigners’ Chinese bond buying has helped put the yuan on a tear, lifting it nearly 6.5% in four months. China’s benchmark lending rate published later today, is expected to be held steady for a fifth straight month.
The euro was weaker at $1.1804 and the pound was inching downwards to $1.2846, amid trepidation about rising coronavirus cases in Europe and Brexit turmoil helped keeping a lid on gains. European countries from the UK to Greece announced new restrictions last week to curb surging infections. Britain is even considering a second national lockdown. The euro and sterling were lagging a 0.2% gain in the Australian dollar which climbed above $0.73 before retracting. The Singapore dollar reached an eight-month peak of S$1.3543 per greenback.
The Japanese yen has had its best week since June last week and is now trading at 104.15 per dollar. Moves were slight and volumes light due to a public holiday in Japan. The yen continues to climb after a seven-week high of 104.27 hit on Friday. The safe-haven currency enjoyed an increase in demand as uncertainty increased, from the US election to glitches in the global economic recovery, which had investors seeking safety or gains after US yields sunk lower. The yen is up nearly 2% in five consecutive weeks of gains.
Fed Chairman Jerome Powell is due to appear before Congressional committees and more members will be holding speeches later this week. Their opinions on how the Fed should handle its more accommodative approach to inflation could drive further yen strength if they imply looser monetary policy settings. Fed’s lower-for-longer commitment on rates would drag on the dollar, though close attention will be paid to remarks from the committee members for any more clues on the new approach to inflation.
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