Home Forex News USD/CNY Edges Lower As Yuan Rises On Upbeat Economic Releases

USD/CNY Edges Lower As Yuan Rises On Upbeat Economic Releases

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  • China Economy Recovery
  • China Caixin Markit PMI Beat
  • Stellar U.S Economic data

The Chinese Yuan continues to grind higher against the U.S dollar as a plethora of positive economic data continues to fuel hopes of accelerated Chinese economy recovery following COVID-19. The USD/CNY exchange broke through a key support level as China’s June Caixin Markit Services PMI rose the highest in over a decade.

PMI Beat

Business activity is on a roll following the reopening of the Chinese economy in the aftermath of COVID-19 disruptions. New orders are increasing at a sharper rate helping support business as well as factory activity. Service providers have also reported a sharp increase in activity as the recovery continues to gather pace.

June PMI rose to highs of 58.4 compared to 55.0 printed in May. Likewise, new business for China services expanded the fastest in over 10-years. Total new orders rose the quickest since 2010 as export work expanded on China, becoming a key supplier of protective gear for COVID-19.

A string of positive economic data continues to offer support to the Yuan that had come under immense pressure at the peak of the COVID-19 pandemic. As the U.S dollar strengthened, the USD/CNY exchange rate rose to 12-year highs. In recent weeks the exchange rate has dropped significantly as traders focus on Chinese economic recovery.

Amidst the improvement, the labor market continues to experience its fair share of struggles with employment levels shrinking for the fifth straight month. However, the contraction was modest amid indication some of the people might have left their roles voluntarily.

USD/CNY Outlook

While the USD/CNY exchange rate has pulled lower in recent weeks, it is susceptible to a strengthening greenback. The U.S dollar has shown signs of strengthening across the board as traders rush to safe-haven, concerned by the potential impact of a second wave of coronavirus infections.

The U.S is grappling with a second wave of coronavirus as new cases surge to over 50,000 a day. Some states have already started imposing lockdown restrictions, a development likely to take a toll on economic activity.

Escalating tensions between the U.S and China over new security is another tailwind that continues to fuel risk aversion. The Dollar tends to strengthen in times of such crisis a development that could see the USD/CNY exchange rate edging higher from current levels.

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