China’s currency staged its biggest rally in 15 years on Friday, buoyed by a wave of foreign demand for Chinese assets and rising expectations that a Joe Biden victory in next month’s US presidential election could help reset relations between the two superpowers, reported the Financial Times.
The onshore renminbi, which had not traded since September 30 due to the lengthy National Day holiday, rose as much as 1.45% on Friday to RMB 6.6930 per dollar — the biggest one-day rise since the currency depegged from the dollar in 2005. The offshore renminbi, which traded throughout the holiday and is more loosely regulated, climbed 0.9% to RMB 6.68.
Demand for Chinese assets has been booming since the coronavirus crisis ripped through global markets in March, due to an accelerating economic recovery in the country and the relatively lofty returns available from its bonds, said the FT. Now, the increasing probability of a Biden win in next month’s US presidential election, particularly with the potential for a “blue wave” for the Democrats in both houses of Congress, has helped to lift the Chinese currency further.
“The view in the market is that the way a Biden administration approaches [US-China relations] is probably going to be less confrontational and certainly using trade less as a tool or weapon against China,” said Daniel Been, head of foreign exchange strategy at ANZ.
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