Tuesday’s rally of yuan was mainly the result of an across-the-board drop of the US dollar against other currencies, after US president-elect Donald Trump said in an interview with the Wall Street Journal that the dollar was “too strong” to compete with its trading counterpart China.
Trump’s remarks also dragged down the US dollar index by 0.9 per cent to 100.28, the weakest level seen since early December.
Although dealers showed little appetite for short yuan positions overnight, it remains to be seen whether the yuan will hold up at the levels seen in early January.
“I think longer term bullish US dollar bias will re-emerge, but it is very much predicated on US fiscal spending and US tax reform,” said Stephen Innes, senior trader at Oanda.
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