Asian markets opened positive against the US dollar on Tuesday, with the Chinese yuan proving to be the most significant mover.
It appreciated by 0.3% against the US dollar, taking first place in the Asian currency markets. Even the Indian rupee showed signs of improvement after coming under pressure from the US dollar earlier in the week.
So why is the Chinese yuan outperforming the US dollar?
In this article, we will look at some of the recent developments in the global currency markets to shed light on this issue.
Sources of the foreign exchange market they reported to Reuters that on Monday, major state-owned Chinese banks shifted their holdings from US dollars to Chinese yuan in onshore markets. This massive sell-off of US dollars by Chinese banks and the subsequent purchase of yuan contributed to the yuan’s dominant position in the currency hierarchy.
Chris Turner, global head of markets at ING, noted that the support provided to the yuan had helped limit the dollar’s recent gains. In addition, Japanese officials’ verbal intervention in support of the yen also played a role in curbing the dollar’s advance.
In contrast, the Indian rupee hit an all-time low of 83.59 against the US dollar on Friday, but recovered to 83.46 at the market open on Monday. Similarly, the Japanese yen briefly strengthened against the US dollar, supported by positive sentiment in Asian markets.
Despite these fluctuations, the Chinese yuan stood out among Asian currencies, outperforming the US dollar in trading on the day. To find out why the Japanese yen is weakening in global currency markets in 2024, read here.
Also, despite temporary setbacks, 2024 could see the US dollar rally as currency investors accumulate US dollars during downturns. This trend strengthens the outlook for the dollar and strengthens its position against the Chinese yuan and other local currencies.
