(Bloomberg) -- China’s yuan strengthened to a five-month high, punching past 6.9 per dollar ahead of this week’s planned trade-deal signing with the U.S.
The currency rose as much as 0.32% to 6.8968 versus the greenback in the onshore market on Monday, the strongest since July 31. The offshore rate gained 0.27% to 6.8963.
China’s economy has shown signs of recovery in recent months as global demand steadies and trade tensions ease, boosting investor sentiment. The U.S. and China are scheduled to sign their “phase one” trade deal on Wednesday. Domestic stimulus efforts and expectations for further monetary easing are also helping to buoy risk assets.
“The yuan’s outperformance since last week has reflected the improving risk sentiment, thanks to signs of the economy bottoming out,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “While there’s no obvious catalyst today, there’s some speculation that China may get a better trade deal than expected.”
Chinese Vice Premier Liu He will lead a delegation to Washington to sign the first phase of the trade deal with the U.S. from Jan. 13-15, according to the Ministry of Commerce.
The yuan has strengthened since early December as U.S.-China trade talks progressed. China’s currency weakened past the key 7 per dollar level for the first time in a decade in August, when tensions between the two nations escalated.
“Nobody wants to take a short CNH position for now, which explains its strength,” said Hao Zhou, senior emerging markets economist at CommerzBank AG in Singapore. “We will need some time to see whether USD-CNH would be consolidating at this time, which in my view is probably the case.”
To contact Bloomberg News staff for this story: Livia Yap in Shanghai at lyap14@bloomberg.net;Claire Che in Beijing at yche16@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, David Watkins
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