Dollar breakout against the Chinese yuan adds a tailwind to the rebound this week

For the most part this year, Chinese authorities have been firm in keeping USD/CNY below the 7.20 threshold. And that is despite the constant pressure on the yuan currency amid China having to deal with recent economic challenges. But amid the dollar’s resurgence this week, they seem to be loosening the shackles in trading today.

Reuters had earlier reported that Chinese state banks had stepped in to limit the drop in the yuan. However, the breach of the key threshold is quite evident as seen above.

A fall in broader Asian currencies this week, alongside heavy selling in the yen, may be in part also pressuring the yuan further. But the fact that Beijing is shifting the lines in the sand is the more important detail at the moment. With the dollar having the propensity to gain further against the yuan, this adds a tailwind to the rebound this week for the greenback.

This article was written by Justin Low at www.forexlive.com.