Yuan leads currency surge in Asia due to China's economic recovery

18 Oct 2023 , 09:53 AM

Better-than-expected Chinese GDP statistics on Wednesday gave Asian currencies a lift, sending the yuan to a one-week high and dampening the U.S. dollar’s rally that has lasted for weeks as U.S. yields have increased.

A bombing at a hospital in Gaza also restrained activity and put traders on edge about the possibility of the violence spreading. On Wednesday, US Vice President Joe Biden is scheduled to travel to Israel. The shekel was fixed at 4 to 1 against the dollar.

China’s GDP expanded by 1.3% in the third quarter, above market expectations of a 1% gain and speeding up from 0.5% in the second quarter. Both industrial output and unemployment decreased.

In addition to the yuan, the trade-sensitive Australian and New Zealand dollars all fell. The Australian dollar last rose 0.2% to $0.6378. By the same amount, the kiwi increased to $0.5909. Yuan/dollar exchange rate reached a one-week high of 7.2905.

Data on Tuesday revealed a significant increase in retail sales, which helped the dollar put pressure on the low-yielding Japanese yen and cause a steep surge in U.S. yields.

The Bank of Japan suddenly announced $2 billion in bond purchases to maintain downward pressure on yields, which caused the yen to fall to 149.68 to the dollar and put pressure on it.

The dollar has previously struggled to advance, which some analysts believed would indicate a loss of momentum.

Since mid-July, the benchmark 10-year Treasury yield has increased by around 100 basis points, and over that same time, the dollar index has increased by 7%.

The euro was unchanged at $1.0574 in Asia after gaining 0.1% over night. Sterling was steady at $1.2170.

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