The U.S. dollar declined while riskier currencies rallied

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Chinese Yuan and dollar

The U.S. dollar tumbled down against most currencies on Thursday while riskier assets such as global equities and commodities rallied. Safe-haven demand for the U.S. currency lessened significantly.

The Chinese yuan hit a four-month high against the greenback, strengthening recent gains. Investors increased positions in Chinese stocks due to growing signs of an economic recovery in the world’s second-largest economy.

The Chinese yuan skyrocketed to a four-month high of 6.9808 in the offshore market and traded higher by 0.2% against the dollar by the end.

China’s currency has been a star performer, as traders discarded the diplomatic tension between Washington and Beijing. They focused on China’s improving economy and its attractive technology sector instead.

The yuan has increased almost by 2.3% from a seven-month trough versus the greenback set on May 27.

Jeremy Stretch, the CIBC Capital Markets’ head of G10 FX strategy, stated that analysts had seen a more generalized view, with a focus back on riskier assets. So far, the Chinese equity rally has been the poster child for the risk-on move across the last few sessions.

Chinese stocks continued their recent surge, with the blue-chip CSI300 index skyrocketing to a five-year high on Thursday.

Stretch added that their bias for the current quarter is a 2% to 3% dollar depreciation, and they see no reason to change that. The greenback should lower as the Federal Reserve supply increases, and the euro is poised for some upside gains on the back of the expected eurozone recovery fund. 

What about the Euro and other currencies?

The euro climbed up by 0.2% at $1.1355, even though German export data failed to meet analysts’ expectations. During the previous sessions, the currency jumped to a one-month high of $1.1371. Meanwhile, the British pound soared by 0.3% to $1.2647, reaching a three-week high.

The Swedish and Norwegian crowns also surged forward to a one-month high against the dollar by 9.15 and 9.35, respectively. Also, the New Zealand dollar jumped to $0.6590, its highest since late January.

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