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Investing.com - The Chinese yuan touched 7.15 against the U.S. dollar on Monday, reaching its strongest level since November 2023, as the People’s Bank of China guided the daily fixing rate lower.
UBS analysts note the yuan’s appreciation comes amid broader dollar weakness globally, with the Swiss bank suggesting there is further room for the Chinese currency to strengthen in coming months.
Recent economic data from China, including better-than-expected GDP figures and export numbers, have bolstered the case for yuan appreciation, according to UBS research. The bank also points to cautiously improving foreign exchange flows and new steps by Chinese authorities to liberalize capital and advance renminbi internationalization as signals of policymakers’ growing comfort with a stronger currency.
The yuan’s strength coincides with market expectations for the U.S. Federal Reserve to begin cutting interest rates in September, a move that typically weakens the dollar against other currencies. The anticipated rate cuts could further accelerate the yuan’s gains against the greenback.
UBS recommends investors keep Chinese yuan exposure unhedged in U.S. dollar portfolios to capture potential currency gains, noting that risks are "tilted toward further yuan appreciation" as the Fed’s monetary policy shift approaches.
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