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Investing.com -- China is easing its control over the yuan, sparking speculation that policymakers might allow a larger currency devaluation to counteract the negative effects of the ongoing trade war with the U.S. This insight was shared by Lee Hardman from MUFG Bank in a recent note.
The People's Bank of China (PBOC) set its daily fixing rate for the dollar against the yuan at 7.2038 on Tuesday. This is the first time the rate has exceeded 7.20 since September 2023. For a more substantial currency devaluation to occur, a shift in strategy would be necessary from Chinese policymakers who have so far maintained the yuan's stability, according to Hardman.
The necessity for such a shift may be mitigated if China advances its plans to stimulate domestic demand. Meanwhile, the dollar has risen to a one-and-a-half-year high of 7.3386 against the onshore yuan, as reported by FactSet.
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