Yuan Shifts to Dollar in Final Sessions after a Rough Week in the Forex Market.
The environment has been favorable for the Yuan, with a good start to the week in the forex market. Although many investors are focusing all their attention on the Chinese Yuan, the future of the Asian currency may not be as prosperous as expected.
The U.S. continues to experience turbulent times that will continue to affect the Dollar, however, analysts‘ confidence remains scattered.
The Yuan Recovers in the Forex Market
Stock market futures showed a mixed mood, but had not been as busy as Monday.
The data, particularly the better-than-expected US employment figures, helped to lift spirits. But with the resurgence of COVID-19 cases and new presidential candidates being announced, the dollar began to stumble.
On the other hand, the Yuan has strengthened significantly in recent days after a surge in mainland Chinese stock markets, with the Shanghai Composite rising nearly 6% on Monday alone.
Due to difficult days for the dollar, and the whole atmosphere of uncertainty that the U.S. currency provided for investors, the Chinese currency began to cry out for business interest.
Investors were looking for riskier assets in the face of rising expectations of a strong Chinese economic recovery, after the country’s government declared new measures to be taken.
With a promise of a stable economic revival on the part of the Chinese economy, the yuan was once again on the minds of investors.
The Yuan displaces the dollar in the Forex market.
Stocks continue to rise, and Chinese stocks are booming, despite the rapid increase in the spread of the coronavirus. China’s FTSE A50 index reached a record high for the week.
Chinese Yuan sets pace on Monday
Will the Yuan really be able to replace the dollar?
The Chinese currency has been the best performer this week. As investors stopped worrying about diplomatic tensions between Washington and Beijing to focus on the more optimistic data. The booming Chinese economy and its attractive technology sector.
While the Chinese Yuan has become the most popular currency in recent days, leading currency market analysts believe that this event should not be taken as a weight on investors‘ decisions.
„Don’t expect the Chinese Yuan to become a „safe haven“ alternative.
Ebrahim Rahbari, global head of currency analysis at Citi.
The truth is that the Chinese currency is not expected to sustain this performance for long.
It is worth mentioning the relevance of safe haven assets. In these uncertain times for the U.S. and its currency, redirecting investments to these assets is a good option.
So-called safe haven assets usually have certain attributes. First, they tend to offer a long-term value storage function. In the short term, they also provide „shelter“ during „periods of crisis.
However, relevant Bitcoin Trader market analysts consider that the Yuan does not qualify as a safe haven asset under these circumstances. Well, it is not so easy to position yourself that way.
„You can’t go in and out of the forex market. Both in terms of how easy it is to access these markets, but also because liquidity is not present in many of the assets,“ Rahbari said.