TOKYO – The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength.

The euro slipped 0.15% to $1.1818 EUR= while the Australian dollar shed 0.25% to $0.7223 AUD=D4.

The yen was little changed at 105.65 to the dollar JPY=.

WHY EVERY ONE OF YOUR DOLLARS DURING CORONAVIRUS NEEDS A NAME: DAVE RAMSEY

The U.S. dollar index edged up to 93.104 =USD, bouncing back from Friday’s near-three-week low of 92.997. The index saw its biggest loss in six weeks on Friday on hopes that a deal for new U.S. stimulus would be reached.

President Donald Trump on Friday offered a $1.8 trillion coronavirus relief package in talks with House Speaker Nancy Pelosi – moving closer to Pelosi’s $2.2 trillion proposal.

But Trump’s offer drew criticism from several Senate Republicans, many of whom are uneasy about the nation’s growing debt and concerned a deal would cost Republicans support in the upcoming presidential election, denting the risk-on mood.

The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength. (iStock


Still, with Nov. 3 election only weeks away, investors bet that Democrat Joe Biden is more likely to win the U.S. presidency and offer a larger economic package.

“On the whole, the big picture has not changed that much,” said Kyosuke Suzuki, director of forex at Societe Generale.

The offshore Chinese yuan dropped after the People’s Bank of

TOKYO (Reuters) – The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength.

The euro slipped 0.15% to $1.1818

while the Australian dollar shed 0.25% to $0.7223

.
=d4>
=>

The yen was little changed at 105.65 to the dollar

.
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The U.S. dollar index edged up to 93.104 <=USD>, bouncing back from Friday’s near-three-week low of 92.997. The index saw its biggest loss in six weeks on Friday on hopes that a deal for new U.S. stimulus would be reached.

President Donald Trump on Friday offered a $1.8 trillion coronavirus relief package in talks with House Speaker Nancy Pelosi – moving closer to Pelosi’s $2.2 trillion proposal.

But Trump’s offer drew criticism from several Senate Republicans, many of whom are uneasy about the nation’s growing debt and concerned a deal would cost Republicans support in the upcoming presidential election, denting the risk-on mood.

Still, with Nov. 3 election only weeks away, investors bet that Democrat Joe Biden is more likely to win the U.S. presidency and offer a larger economic package.

“On the whole, the big picture has not changed that much,” said Kyosuke Suzuki, director of forex at Societe Generale.

The offshore Chinese yuan dropped after the People’s Bank of China (PBOC) said it will lower the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading.

Analysts said the measure could keep the yuan’s strength in check by encouraging the use of forwards.

“The authorities have not stood in the way of yuan strength, but this move could be seen as a sign that they want to slow the pace of appreciation,”

(Bloomberg) — China’s yuan strengthened and stocks rose on mainland exchanges in a positive start to the month for traders returning to work after an eight-day holiday.

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The currency advanced 1.1% as of 9:53 a.m. in Shanghai, tracking recent moves in the offshore rate. The People’s Bank of China set its yuan fixing at 6.7796 per dollar on Friday — or slightly stronger than expected — suggesting it will continue to allow for currency gains after the yuan had its best quarter since 2008 versus the greenback.

“Markets will take any indication that the authorities are not too concerned about the level of the yuan as a positive sign,” said Khoon Goh, head of research at Australia & New Zealand Banking Group Ltd. “In effect, not sending a signal is in itself a signal.”

The Shanghai Composite Index of stocks rose 1.4% and the CSI 300 Index climbed 1.7%. China’s $9.4 trillion onshore equity market last traded on Sept. 30.



chart: China's yuan strengthens toward 6.7 per dollar


© Bloomberg
China’s yuan strengthens toward 6.7 per dollar

Solar and technology stocks were among the biggest gainers in early trade. Longi Green Technology Co. surged 9.3% to hit a record high. Lens Technology Co. rose 7.4% and GoerTek Inc. added 6.3%.

“Stocks are getting a boost from the better-than-expected consumption data during the Golden Week holidays and a strong yuan,” said Daniel So, strategist at CMB International Securities Ltd. “Investors are looking forward to the Communist Party meeting toward month-end, before which market sentiment has usually been positive, as more stimulus policies are expected.”

China is unique among major economies to close its financial markets for long periods several times a year. In February, stocks were hit by a ferocious wave of selling and the yuan weakened past a key level against the dollar, as a rapidly

Oct 7 (Reuters)Chinese markets reopen after a week-long break on Thursday, and officials may not react well to what the offshore yuan has been up to in the meantime .

The CNH extended its rally from Sept 30 to notch a 17-month peak on Monday, gaining as much as 1.3% against the USD. Beijing might want to dampen such rapid appreciation in the yuan as the economy recovers .

The People’s Bank of China has several tools to wrestle the yuan back to the ground. The opening salvo Thursday could be via strong adjustment of its daily yuan benchmark.

Direct FX intervention is possible, but that would be too forceful and probably trigger a vigorous knee-jerk exit from the yuan, which would be contrary to Beijing’s goal to internationalise the currency.

There’s a more subtle way to tap the brakes on the yuan – through the forwards market. Authorities could soak up liquidity to shift the forward pricing curve, making it less appealing to hold the offshore yuan.

Or China could just step back and allow U.S. President Donald Trump’s tantrums , which are likely to escalate as the election draws nearer, to whittle the yuan index back down from its 200-week moving average .

For more click on FXBUZ

YuanIndex: https://tmsnrt.rs/3jQoVE9

CNHdaily: https://tmsnrt.rs/36FhNX6

(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The yuan is closing out its strongest quarter against the dollar in more than a decade, boosted by optimism over China’s economic outlook and by the country’s comparatively high interest rates.

From the start of July through Friday’s close, the yuan has strengthened 3.7% against the dollar. That puts the yuan on track for its biggest quarterly gain since early 2008, FactSet data shows. The only other bigger quarterly gains on record are from the 1970s and 1980s, long before China began reforming its currency market in 1994.

China’s resilience, as the first country to suffer from the coronavirus and then bring it under control, has helped, said Jason Brady, president and chief executive of Thornburg Investment Management. “What we do see is a strong Chinese economy, which is part of what’s behind the strong renminbi,” he said, using another name for the currency.

Having returned to work, China is doing brisk business abroad. It reported stronger-than-expected growth in exports for August and a widening trade surplus with the U.S. Greater demand for China’s goods also increases demand for its currency.

This month the yuan rallied below 6.8 a dollar to hit its strongest levels since May 2019. It stood at close to 6.82 a dollar on Monday.

Meanwhile, Mr. Brady said he expected the dollar to stay broadly weak as the U.S. seeks to revive its economy with the help of ultralow interest rates, and with fiscal measures.

China’s central bank has been less dovish than major counterparts, and hasn’t cut any of its key policy rates since May. That has helped widen the gap between returns available on Chinese assets such as sovereign bonds, and those in other large economies.

With the yield on Chinese 10-year government bonds above 3%, the yield advantage over U.S. Treasurys has hit