The offshore renminbi has broken down key resistance level 6.85 against the greenback yesterday. This is the lowest level seen since 2008.
USD/CNH falls to eight-year low at 6.86
A knock-on effect of the strong US dollar is fast depreciation of emerging market currencies, including the Chinese yuan, the Malaysian ringgit and the Indonesian rupiah. The offshore renminbi has broken down key resistance level 6.85 against the greenback yesterday. This is the lowest level seen since 2008. The move also signals the PBOC’s tolerance towards a weaker currency. The recent PPI and GDP data shows signs of stabilisation in the World’s second largest economy, and it has given the authorities more room to loosen control of its currency and allow greater flexibility.
This comes with rising expectation of Federal’s December rate hike, as futures market shows the probability has climbed to 92% from 82% a day ago. And as a result, US dollar index surged to above 100 for the first time in 12 months. It is worth noting that the index has challenged the 100 level twice, once in 2014 and again in 2015, but failed to stay above it. Technically, 100 is still a critical resistance level and we might see some consolidation around here.
The political situation in the Unites State continues to influence financial markets. President Obama reassured that his successor, Donald Trump, will maintain the US’s commitment to NATO and the transatlantic alliance. This shows that the White house is trying to temper some of Trump’s extreme opinions during his election campaign and ensure a smooth transition in power.
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