The Chinese Yuan or the Renminbi, as it is otherwise known, is gaining strength against a weakening U.S. Dollar like most of the other world currencies. In this case the Dollar sets the tune as the U.S. Dollar index declined to 102.9 points from 104.9 points at the beginning of January, or by 2%. USD/CNY also dropped by 2% from 6.90 to 6.77 by January 12.
The Greenback is weakening mostly on expectations of mild monetary policy moves by the Federal Reserve (Fed), and generally amid a more optimistic sentiment in the market. One of the reasons for this optimism is that China is gradually removing its harsh COVID restrictions. As the Chinese economy opens up, both domestic production and sales in world’s leading countries, and also imports in China form these countries, will be boosted. So, expectations about the improvements of the Chinese economy are strengthening its currency, but mostly indirectly via the U.S. Dollar.
Recent 2022 inflation figures showed that prices increased in China to 1.8% year-on-year from 1.6% in November. Inflation in the United States slowed down to 6.5% year-on-year in December from 7.1% a month before. The core Consumer Price Index (CPI) in the United States declined to 5.7% year-on-year compared to 6.0% in November. These figures are in line with forecasts but the slowing down of prices in the U.S. has been affected the Dollar more as investors expect the Fed to decrease the pace as which it is rising interest rates as inflationary pressure eases. This will consequently lower the yields of U.S. Treasuries and the demand for the Greenback.
The U.S. Dollar index fell to 102 points on the news, while the USD/CNY continued to go down to 6.72. The downside trend for the American currency is ongoing, as the next target for USD/CNY is at 6.70-6.72 with the resistance at 6.79-6.81.
The Fed has to make the next move now during its meeting on February 1. According to the Fed Watchtool investors bet that the monetary watchdog will raise its interest rate from 4.5% to 4.75%. However, if the rhetoric of Federal Open Market Committee (FOMC) members would be tighter than expected during the current euphoria in the market, the Dollar may substantially strengthen to 105.5 points for the U.S. Dollar index, and to 6.90 for the USD/CNY.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2023 Teletrade-DJ International Consulting Ltd
This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.