China’s renminbi jumps as global markets kick off 2021

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China’s currency rallied against the dollar after global markets kicked off the first day of trading in 2021 while Japanese stocks fell as officials in Tokyo considered emergency measures to halt coronavirus outbreaks.

The onshore-traded renminbi strengthened 0.5 per cent to Rmb6.4986 per greenback in early trading on Monday as it crossed the important 6.5 per dollar threshold for the first time since June 2018.

China’s currency enjoyed a banner 2020, climbing 6.7 per cent against the dollar partly due to the country’s economic recovery from the coronavirus pandemic and hopes that a Joe Biden presidency in the US could lead to reduced tensions between Beijing and Washington.

The renminbi has now erased nearly all of the losses it suffered against the dollar since Donald Trump kicked off a trade war between the countries two-and-a-half years ago.

“The widening interest rate differential between China and the US has also bolstered capital inflow and the [renminbi’s] appreciation,” added Alicia García-Herrero, chief Asia-Pacific economist at Natixis.

China’s offshore-traded renminbi, which is less regulated than its onshore counterpart, gained 0.6 per cent to Rmb6.4645 on Monday. The offshore currency passed the 6.5 handle on Thursday.

Mainland China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.3 per cent on Monday after the latest Caixin/Markit manufacturing purchasing managers’ index showed that growth in Chinese factory activity slowed in December while remaining firmly in expansionary territory.

In Hong Kong, shares in China’s three largest state-run telecoms groups tumbled after the New York Stock Exchange began delisting the companies under a Trump administration ban on US investment in businesses allegedly linked to the country’s military.

China Mobile fell as much as 4.5 per cent to a more than decade low while China Telecom and China Unicom dropped as much as 5.6 and 3.6 per cent, respectively. Hong Kong’s benchmark Hang Seng index was up 0.5 per cent.

Elsewhere, Japan’s benchmark Topix index dropped about 1 per cent after local media reported that the government could declare a state of emergency in Tokyo and its surrounding areas to counter a surge in coronavirus cases.

Futures for Wall Street’s S&P 500 index were little changed, while those for the FTSE 100 slipped 0.2 per cent.

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