Dollar Rockets While the Chinese Yuan Takes a Hit After Chaos in Beijing
On Monday, November 28, the U.S. dollar gave investors a lift as protests erupted across China over the government’s strict anti‑COVID rules. The unrest prompted traders to bulldoze riskier assets and pile into the safe‑haven greenback, sending the Chinese yuan slumping to its lowest spot in more than 14 days.
What’s Fueling the Unrest?
- Urumqi Apartment Fire: A tragic blaze that claimed ten lives in Urumqi sparked fury in the west.
- Shanghai Showdown: On Sunday night, hundreds of demonstrators clashed with police in Shanghai, amplifying the chaos.
- With COVID‑19 cases rising, people fear the Beijing response could be unpredictable.
“We’re really watching how the government will react,” said Chris Weston, Pepperstone’s research chief. “The response is so unpredictable that it’s a big reason for people to de‑risk.”
Currency Moves That Matter
Offshore Yuan: Fell over 2 weeks low, ending at 7.2242 USD – down about 0.4 %.
Australian Dollar: Tumbled more than 1 % to $0.6681.
New Zealand Kiwi: Laggered 0.72 % to $0.6202.
Meanwhile, the euro slid 0.5 % to $1.0350 and the sterling dipped 0.26 % to $1.2057.
Central Bank Actions
China’s People’s Bank of China announced on Friday that it would cut banks’ reserve‑requirement ratio (RRR) by 25 basis points, effective December 5.
IG’s Iris Pang warned that a single RRR cut might not spur a big jump in bank lending. She added that companies are bracing for softer retail sales amid rising COVID cases and falling housing prices from unfinished projects.
What the U.S. Landscape Looks Like
The dollar index nudged up 0.07 % to 106.41, moving away from the three‑month low of 105.30. The pause in the dollar’s decline reflects expectations that the Fed might soon ease its rate‑hiking tempo.
Fed Chair Jerome Powell will discuss the economy and labor market at a Brookings Institution event on Wednesday, offering a window into future monetary policy directions.
The Yen’s Quiet Gain
Bank of Singapore’s Moh Siong Sim noted that fans of a softer Fed predict a 50‑basis‑point rate hike and a potential pause next year. This speculation has helped the Japanese yen climb about 0.5 % to 138.40 USD.
“The market’s thinking Fed might dial back, so that puts a ceiling on U.S. Treasury yields. Dollar‑yen is probably waiting in line for that idea,” Sim said.
All in all, the day’s drama in China triggered a wave of safe‑haven buying that had the dollar taking a step forward while the yuan and other currencies took a little back.
