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U.S. Dollar Strengthens: China’s Yuan Faces 16-Year Low

September 8, 2023

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Key Highlights at a glance:

  • U.S. dollar reaches a six-month peak.
  • Improved U.S. jobless claims defy expectations.
  • Slower U.S. productivity growth, but still robust.
  • China’s yuan drops to its lowest in 16 years.
  • S. Economy Outperforms Global Trends

Resilience in the dollar

The U.S. dollar has shown remarkable resilience. This week, it pushed the Japanese yen to a 10-month low and weakened the euro and sterling to their lowest points in three months. This upswing comes courtesy of a tenacious U.S. economy that continues to perform well, even with aggressive measures from the Federal Reserve.

Economic commentators have remarked that the data shows US fundamentals are strong and that the performance of the dollar compared to broader global economic trends is very encouraging.

A roll of dollars on the American flag U.S. Dollar
US dollar rises to six-month high

Data Insights

Initial claims for unemployment benefits surprisingly dropped to 216,000 from a revised 229,000 the previous week.

Nonfarm productivity rose at a 3.5% annualized rate during Q2, the highest since Q3 2020.

China’s Yuan: A Decline Reflecting Economic Challenges

China’s yuan slid down to a concerning 16-year low against the dollar, a direct result of issues like a property market slump, weak consumer spending, and reduced credit growth in China.

Market Movements:

  • The onshore yuan dipped to 7.3299 per dollar, the lowest since December 2007.
  • China had initiated several policy measures to revitalize its economy post-pandemic.
  • Investors are keenly awaiting further measures from Beijing to bolster market confidence.
1 Yuan banknote, with portrait of Chairman Mao U.S. Dollar
The Chinese Yuan has fallen to its lowest point in 16 years

Global Currency Dynamics:

There have been some tiny movements in global currencies. The Australian dollar decreased by 0.1% to US$0.6379, while the New Zealand dollar rose by 0.2% to US$0.5870. The euro also dropped by 0.3% to $1.0696 after hitting its June low.

Traders are vigilant about potential interventions as the yen struggles against the dollar.

Final Noteworthy Mentions

European Central Bank (ECB) officials signaled that a rate increase is still a possibility, while the Bank of England’s Governor hinted at nearing the end of its rate-hike cycle due to inflation pressures.

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