China’s currency upsets forecasts by beginning the new year stronger

THE omens for the Chinese yuan seemed bad heading into 2017. The capital account looked as porous as ever, making a mockery of the government’s attempts to fix the leaks. The new year, when residents received fresh allowances for buying foreign currency, was due to bring even more pressure. The mighty dollar would be a magnet for Chinese investors as it strengthened still further in the run-up to Donald Trump’s inauguration. Analysts braced for a stampede for the exits from China. The yuan had fallen sharply at the beginning of 2016, catching them by surprise. This time, they were ready.

Instead, the yuan began the year as one of the world’s star performers. This was particularly so in the offshore market, where foreigners trade it most freely. It gained 2.5% against the dollar over two days in the first week of 2017, its biggest two-day increase since 2010, when trading began in Hong Kong, its main offshore hub. Within China itself, price increases were more subdued, but the yuan still climbed to a one-month high.

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This post was originally published in the Economist.

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China’s currency upsets forecasts by beginning the new year stronger

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