Dollar Down as Investors Eyes Biden for Presidency and Further Boosts Chinese Yuan

On Friday, the dollar drifted toward a small weekly loss, while the Chinese Yuan soared to a 17-month high, as investors wagered on a Joe Biden presidency on more U.S. stimulus spending.

The Yuan’s leap, when China’s markets reopened after the Mid-Autumn break, was partly a catch-up since the offshore yuan has gained against a softening dollar during this week.

But as it extended gains beyond 1%, its biggest daily jump in nearly two years, traders said it provided one of the clearest indications yet that Biden’s lead in the polls is driving bets on a steadier Sino-U.S. relationship.

A stronger-than-expected setting of the yuan’s trading band also signaled that policymakers in China don’t mind its rise.

The yuan was last up 1% at 6.7218 per dollar in onshore trade and it rallied half a percent to 6.7083 per dollar offshore. The dollar eased 0.1% against a basket of currencies and it is down 0.4% for the week.

“I think the main message is that the (People’s Bank of China) is allowing further renminbi appreciation at this level,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong. “So markets are positioning for a renminbi rally.”

The prospect of a Biden administration less inclined toward tariffs and trade disputes was another boost, he added.

“Polls are showing that Biden is taking the lead… it means the risks of resuming a new trade war are getting smaller, so I think this is positive for the renminbi.”

Reuters/IPSOS polling this week put Biden, a Democrat, narrowly ahead of Republican President Donald Trump in five states – Wisconsin, Pennsylvania, Michigan, Florida and Arizona – that will play critical roles in deciding the victor.

TECHNICAL OUTLOOK

In the daily charts of GBP/USD, the sterling gained against the dollar early morning in Sydney Session.

The GBP/USD pair edged up 0.16% to 1.2954, holding firm throughout the week as investors continue to monitor the progress towards a Brexit divorce deal between the U.K. and European Union.

With the USD wounded due to the uncertainty of the U.S. Presidential Elections and the resurgence of Covid-19, other major currencies are gaining from these losses especially the Sterling.

The ongoing Brexit woes also boosts the sterling as of the moment but still uncertainty whether the pair is bullish or bearish is yet to be decided as the pair is still trading within the support and resistance level.

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