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Asian trade-related currencies strengthen after China data

Asia’s trade-exposed currencies held firm on Monday as data showed China’s economic rebound from the pandemic accelerated in the third quarter, with the yuan staying close to its recent 1-1/2-year high.

China’s gross domestic product grew 4.9% in July-September from a year earlier, slower than analysts’ forecast but faster than the second quarter and helped by strong gains in industrial output and an acceleration in retail sales.

The yuan and the Australian and New Zealand dollars slipped from session highs after the Chinese GDP headline miss, but then rebounded on the view that consumption data from China was a harbinger of better growth in the current quarter.

The Chinese currency was last flat at 6.6935 against the U.S. dollar in the offshore market CNY=EBS, close to 6.6785 which it reached on Oct. 9, its strongest since April 2019.

The yuan benefited in the last few months from hopes of a Joe Biden win in the U.S. presidential election, as he is seen as less of a threat to U.S.-China relations.

The Australian dollar was 0.3% higher at $0.7098 AUD=D3 and the New Zealand dollar rose 0.4% to $0.6627 NZD=D3.

“The renminbi, other Asian and commodity-related currencies should continue to benefit,” said Lee Hardman, currency analyst at MUFG, noting that the spread of COVID-19 in Asia remains more contained than in the rest of the world and that points to “a continuation of cyclical outperformance” there.

The dollar was broadly stable elsewhere, supported by investor worries about rising coronavirus cases, the looming U.S. election and fading prospects of any fiscal stimulus before the election.

An index tracking the greenback against a basket of currencies was last steady at 93.68 =USD, close to the top of the last three months’ trading range.

“The dollar can remain elevated this week,” said Commonwealth Bank of Australia analyst Kim Mundy. “A lack of fiscal stimulus and rising coronavirus infections raise concerns about the global economic outlook.”

Euro/dollar was also neutral at $1.1714 EUR=EBS.

Faint hopes that Democrats and the White House could agree on a new spending programme was tempered by the opposition of Senate Republicans and as investors focused on what the election outcome means for stimulus later.

Fifteen days out from election day, Biden leads Trump by about 10 points in national polls, and has a narrow lead in several battleground states. The pair are due to face off in a final debate on Thursday.

Elsewhere, the Nordic currencies strengthened, with the Norwegian crown leading the way. The crown was up 0.5% versus the U.S. dollar at 9.3430 NOK=D3 and by the same amount versus the euro at 10.9395 EURNOK=D3.

The British pound also rose by 0.4% versus the euro to 90.38 pence, on hopes the deadlock in Brexit talks can be broken. Versus the dollar, sterling rose 0.3% at $1.2955 GBP=D3.
Source: Reuters (Reporting by Olga Cotaga; Additional reporting by Tom Westbrook in Singapore; Editing by Susan Fenton)

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