Dollar dance continues, yuan breaks below 7.00

The US dollar posts modest gains overnight

The US dollar continues its dance in both directions, as the global stock markets are also looking for firmer footing. Will the greenback continue to show a lack of a trend in the Friday session? Having teased markets earlier this week with the possibility of a downside US dollar breakout, currency markets have dropped back into range-trading mode. Versus the majors, the US index rose 0.35% to 96.77 as US stock markets retreated. EUR/USD at 1.1275, GBP/USD at 1.2590 and AUD/USD at 0.6940 leave them all in no-man’s land.

USD/JPY continued to grind lower to 107.05 today, as nagging Covid-19 concerns in Japan saw haven-based buying of the yen. In the bigger picture though, the fall to 107.05 leaves USD/JPY dead centre of its 106.00/108.00 monthly range.

The Chinese yuan continues to impress, the onshore USD/CNY fixing lower again at 6.9943. This is CNY’s strongest fix since early March, before the global equity market collapse. Both USD/CNY and USD/CNH toughed 6.9800 overnight, but their direct correlation to the stock market rally on the mainland this week was laid bare this morning. From the overnight lows, both yuans have faded to 7.0050 in Asia today as China stock markets give back a notable part of their week’s gains. The 7.0250 regions should cap a US dollar rally in the short-term.

Overall intra-day moves will continue to be dominated by price action on the mainland equity markets. The move lower on Friday in mainland stocks reflects the domination of fast-money retail investors in those markets. That partly explains why the fall in China has not been reflected elsewhere across the region. Having told everybody to get long though, I suspect the Chinese government does not want a one-week bull market on its hands. Expect more exhortations from them to build their wealth and do their duty for the country.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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