- USD/CNH extends gains to 6.9975 from 6.9940 after PBOC's rate decision.
- The central bank kept rates unchanged at 3.85% as expected.
- The US-China tensions and the decline in the US stock futures is likely weighing over yuan.
USD/CNH continues to gain altitude despite the People's Bank of China's (PBOC) status quo decision on interest rates.
The pair is now trading at session highs near 6.9973, representing a 0.18% gain on the day, having hit a low of 6.9882 early Monday.
The central bank kept one-year and five-year loan prime rates unchanged at 3.85% and 4.65% unchanged as expected by markets. The decision to hold rates steady comes after the data released last week showed the industrial production rose 4.8% year-on-year in June to register expansion for the third straight month and the economy grew 3.2% in the second quarter following a record slump in the January to March period.
However, the offshore yuan (CNH) has so far failed to pick up a bid on PBOC's decision to keep rates steady. Markets look to be offering the Chinese currency on escalating tensions between the US and China.
Last week, China imposed sanctions on US politicians including Sens. Ted Cruz and Marco Rubio for condemning Beijing's treatment of Uighur Muslims and other minorities. Tensions between the two nations have escalated in recent weeks with China imposing a new security law on the semiautonomous region of Hong Kong and the US retaliating by suspending its special trade measures with Hong Kong.
The legendary hedge fund manager Ray Dalio said last Thursday that the economic tensions between the US and China could conceivably escalate into a "shooting war."
Apart from that, the 0.40% decline in the S&P 500 futures seen at press time could be boding well for the greenback. Investors are likely disappointed by European leaders' failure to carve up a vast recovery fund designed to help haul Europe out of its deepest recession since World War Two.
The sentiment, however, may change during the day ahead, as the Congress is set to begin debating a new aid package this week to help the economy absorb the shock arising from the second wave of the coronavirus outbreak.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.