Chinese Yuan Gains Strength Amid The US Dollar’s Softening Stance

Juhi Mirza
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Source: / AlexSava/ Getty Images

The Chinese Yuan is currently holding an upper hand in the currency wars as the US dollar continues to project a softening stance. The Chinese Yuan is currently trading at 7.1108 per US dollar. However, Yuan exhibited slightly improved metrics on Wednesday, with a renewed price of 7.2447 against the US dollar. The difference totaled to a spike of 30 pips against the USD, which, according to analysts, is happening due to Fed rate cut expectations due soon.

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Why Is The Chinese Yuan Strengthening?

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Source: Fortune

The Yuan gained strength amid renewed expectations that the US Federal Reserve will soon reach a possible consensus, with hopes of conducting a 50 basis cut this year.

These expectations are sparked by a recent release of the US NFP report, which predicted the possibility of adding 185,000 new jobs. The European Central Bank is also gearing up for a possible rate cut this year. Responding to these recent anticipations, the US dollar index fell to 104.102, indicating the dynamics are shifting to accommodate a new change.

Moreover, China is consistently working towards improving its economic prospects by reforming its regime and holding gold to back its reserves. This is also helping the nation improve its economic conditions, consequently strengthening the Yuan in the process.

The Future Of The US Dollar

The US dollar is currently trading at 104.27. The index is currently projecting a bearish tinge. This is possibly due to expectations surrounding a possible rate cut introduced by the ECB in its upcoming policy meeting.

Traders are also currently on standby, awaiting a new NFP report due to be unveiled on Friday. The report’s metrics may further trigger volatility in USD’s value. Per the mixed data released on Wednesday, the Feds rate cut anticipation is also taking a toll on the USD. The said scenario is making other currencies appear lucrative for investors to explore and interact with.

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In addition to this, the rising geopolitical tensions are also adding to the US dollar woes. The fears of the US Dollar being weaponized are also spreading mayhem in the space. The said development is boosting gold prospects, helping its price to skyrocket to $2400.