Yuan stands tall on China recovery, RBA weighs on Aussie

Yuan stands tall on China recovery, RBA weighs on Aussie

20 Oct 2020 09:57 AM

The yuan held near a two-year high against the dollar in offshore trade on Tuesday, on signs of China's robust economic recovery while the Australian dollar slipped to a three-week low as the central bank looks set to enhance monetary easing.

Broader risk sentiment was curbed by caution ahead of a Tuesday deadline to reach agreement on a U.S. coronavirus aid package as well as the Nov. 3 U.S. presidential election.

China's offshore yuan rose as high as 6.6695 per dollar on Monday, surpassing its 2019 peak and hitting its strongest level since July 2018

The yuan's gain came as data on Monday showing a recovery in China's consumer sector helped boost not only the Chinese currency but others, including the euro.

On the other hand, the Australian dollar dropped 0.3% to $0.7045, hitting a three-week low of $0.7038 on increasing expectations of monetary easing next month by the country's central bank.

Allen, and the market, expect the cash rate to be cut to 0.1% from the current 0.25% and the central bank to extend bond buying out to the five- to 10-year sector of the yield curve.

Broader confidence was also dented by a fall in U.S. share prices as investors grew cautious about prospects of a stimulus deal in Washington.

Markets probably still think a deal before the election is unlikely.

However, investors still think British and European negotiators might be able to salvage post-Brexit trade talks to prevent disruptions that a no-deal finale to the five-year Brexit drama would cause.