Is The Chinese Yuan Beginning to Settle In?

The dollar is holding its losses today, but markets, including China, have taken a respite this week. While there are concerns about further lockdowns, there have been some encouraging developments, with the COVID-19 situation improving in Shanghai.

Nonetheless, Chinese officials can expect to maintain relaxing policies to stimulate the economy. It is already a challenging climate for the economy since credit data has been sluggish; this is bolstering the case for more moderate measures to be implemented in the coming weeks/months.

The LPR decision on Friday will be an essential policy step for China. The most recent cut occurred in January, and some market participants anticipate that the next one will appear soon.

The euro hit $1.0563 in early Asian trade after climbing 1.1 percent overnight, its most important day of percentage gains since March.

Sterling reached $1.2501 after a 1.4 percent overnight surge; this was its strongest day since late 2020; it received aid from statistics showing Britain’s unemployment rate fell to a 48-year low.

These advances pushed the dollar index as low as 103.18 in early Asia, its lowest level in over two weeks.

Shanghai reached the long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones on Tuesday after laying out its most detailed timeline for exiting a lockdown the day before.

In April, retail sales in the United States surged sharply as consumers purchased more automobiles amid improved availability and increased restaurant spending.

Equities rose overnight, suggesting stronger risk sentiment, as US benchmark Treasury yields rose, closing at 2.9878 percent.

Overnight, Federal Reserve Chairman Jerome Powell said at a Wall Street Journal event on Tuesday that the Fed will “keep pushing” to tighten monetary policy in the United States until it is obvious that inflation is declining.