Onshore yuan rallied to a high of 7.1150 per US dollar during morning trading, the strongest level since January 2.
Anticipation of US interest rate cuts in September drove China’s yuan to a seven-month high against the US dollar on Monday, and also boosted the Japanese yen, with some analysts expecting the outlook for the Chinese currency would still largely depend on the strength of the US dollar.
On Monday, the onshore yuan rallied to a high of 7.1150 per US dollar during morning trading, the strongest level since January 2.
The yen also surged by more than 3.4 per cent against the US dollar, which has been under pressure following the release of weak American job data on Friday. Japan’s benchmark Nikkei 225 index and the broader Tokyo Stock Price Index, commonly known as Topix, also fell over 13 per cent on Monday.
Forecasts on US interest rate cuts had gone from 25 basis points to almost 50 basis points in September over a souring outlook on the world’s largest economy, analysts said.
“The weaker US dollar on the back of US recession fears, which has seen the market pricing in aggressive rate cuts for the rest of this year, has been the key driver behind the yuan’s surge,” said Khoon Goh, head of Asia research for ANZ.
“Now that the spot [price] has converged towards the fixing, we could see some stabilisation in the currency, although this is dependent on the near-term trajectory of the US dollar.
