China: Yuan strengthens to over one-year high
September 18, 2017
The Chinese yuan (CNY) rallied to its strongest value since May 2016 in September, continuing a trend that started in June amid stronger-than-expected growth and a weakening of the U.S. dollar. On 8 September, the yuan closed the day at 6.48 CNY per USD, which represented a 3.4% appreciation over the same day of the previous month. It gained 6.7% year-to-date and was 2.7% higher compared to the same day last year. In the following days, the yuan lost some of the ground due to a strengthening USD.
Positive market sentiment has strengthened the Chinese currency. Economic growth surprised market analysis to the upside in H1 and, although recent indicators point to a deceleration in Q3, economic dynamics remain fairly strong overall. Moreover, the yuan benefited from diminishing fears of an open trade war with the U.S., tight capital controls and a weakening of the U.S. dollar. While the strengthening of the yuan highlights China’s healthy growth momentum, if sustained it could hurt the country’s all-important external sector.