Home Forex News USD/CNY Flat At 1-Month Lows On Chinese Corona Vaccine Promise

USD/CNY Flat At 1-Month Lows On Chinese Corona Vaccine Promise

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  • China COVID-19 Vaccine Prospects
  • China-U.S Trade Tensions
  • USD/CNY Outlook

USD/CNY was flat, Monday morning, at 1-month lows as a resurgent U.S dollar continued to curtail Yuan gains. The pair is currently at 12-year highs, the Yuan having come under pressure in the wake of COVID-19 pandemic. Reports that China might be closing in on a coronavirus vaccine is a development that should continue to weigh in on the exchange rate throughout the week.

Corona Virus Vaccine

Reports indicate that Chinese Biopharmaceutical CanSino Biologics Inc. has developed a vaccine in conjunction with the military research team. The team has already conducted Phase 1 and Phase 2 trials, of Ad5-nCoV, with results signaling it has the potential to prevent SARS-CoV-2.

A vaccine for coronavirus would be a big boost for China and the rest of the world at a time when the pandemic continues to take a toll on activity activities. China is one of the countries that have been worst, international trade having come to a halt with the closing of borders.

Chinese industries are operating at the lowest production levels, as demand for end products remains at all-time lows. Likewise, the Chinese Yuan has continued to weaken against the dollar, sending the USD/CNY exchange rate higher.

In addition to COVID-19 disruptions, the Yuan has remained under pressure on growing geopolitical tensions and economic uncertainties. A brewing tussle with India threatens to trigger a further spike in USD/CNY exchange rate as the dollar tends to benefit from such crisis.

Trade Tensions

Trade tensions between Beijing and Washington is another headwind staying in the way of the Yuan strengthening across the board. A standoff with the U.S threatens to take a toll on many industries across the two countries, especially on trade tariffs coming into play. The U.S has been the most aggressive, having blocked the listing of Chinese companies in the U.S as well as the ability of them to take up contracts.

Similarly, Brussels has warned that the EU is entering a crucial stage as part of ongoing trade talks with China. The EU has already warned that it is considering new instruments to restrict Chinese investments in Europe unless Beijing agrees to a level playing field on trade.

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