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  • The US Dollar is moving higher after a blowout NFP report bolstered confidence in the US economic recovery. Markets will now turn attention to next week’s US inflation data which could boost the Greenback. Get your market alert from @FxWestwater here: https://t.co/Ud62r3hKRF https://t.co/dvvDCJvlbP
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/7g9pB8D9xK
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/OCLzmXaDCu
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  • Supply constraints, rebounding global demand and rising inflation expectations may drive crude oil prices higher in the near term. Get your market update from @DanielGMoss here: https://t.co/ezPoAwcJt7 https://t.co/NMfk1cYSvE
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/OiRiBVeuzL
  • Crude Oil Prices Aiming Higher on OPEC Surprise, Inflation Expectations - https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/03/06/Crude-Oil-Prices-Aiming-Higher-on-OPEC-Surprise-Inflation-Expectations.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Moss&utm_campaign=twr $CL #Crudeoil #OOTT #OPEC https://t.co/AKvXWX9DLQ
  • Given the size of the rally in the eleven months preceding the beginning of the current decline a broader sell-off looks warranted. Get your market update from @PaulRobinsonFX here: https://t.co/UxZiSulpwB https://t.co/raXvlzkGbV
CNH 1Q Forecast: Vaccines and Biden’s Presidency May Threaten Yuan’s “One Way” Trajectory

CNH 1Q Forecast: Vaccines and Biden’s Presidency May Threaten Yuan’s “One Way” Trajectory

Margaret Yang, CFA, Strategist

CNH 1Q Forecast: Vaccines and Biden’s Presidency May Threaten Yuan’s “One Way” Trajectory

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The offshore Chinese Yuan has strengthened over 7% against the Greenback over the past 12 months, marking it the best-performing Asian currency in 2020. The seemingly “one way” trajectory of USD/CNH was primarily driven by a Dollar weakness as well as the rapid recovery of the Chinese economy from the Covid-19 pandemic. China registered a real GDP growth rate of 4.9% in Q3, outshining global peers.

Emerging market currencies were buoyed by capital inflows this year, as major central banks made a swift shift back to ultra-low interest rates and decisively unleashed liquidity to contain credit risks. A relatively better-handled pandemic situation in the Asia-Pacific region stands in contrast to a second major viral wave that swept most parts of the US and Europe, making a long-Yuan trade appealing for most currency traders.

This narrative may change as the calendar turns to 2021, with the rollout of coronavirus vaccines potentially expediting a recovery in western economies and reining in further monetary stimulus. A potential rebound in the US Dollar as a result of stronger fundamentals and inflation overshoot may lead to a reversal of EM currencies’ bullish trend.

More importantly, a possible reigniting of US-China tensions under Biden’s presidency may threaten the Yuan’s rally, particularly surrounding disputes over technology firms, intellectual property, geopolitical frictions and trade. The Yuan suffered a few rounds of rapid depreciation when President Donald Trump slapped trade tariffs on Chinese imports starting in mid-2018. The currency pair was viewed as a sentiment barometer for the US-China relationship, and will likely continue to play this role into year 2021.

USD/CNH Weekly Chart

USD/CNH Weekly Chart, US-China Trade War, COVID-19 Pandemic

Chart prepared by Margaret Yang, created with IG

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