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Chinese Yuan Finishes 2019 Stronger, Still Records Annual Loss

December 31, 2019 at 18:49 by Andrew Moran

Chinese yuan denominationsThe Chinese yuan is gaining on some of its major currency rivals to finish 2019, but the currency will still end the year lower. The yuan suffered some steep losses throughout the year, though it has rebounded in recent months because the trade dispute with the US is subsiding and slightly better economic data. The yuan’s performance in 2020 will be closely watched by observers as it might impact American negotiations surrounding the second and third phases of a trade deal.

According to the National Bureau of Statistics (NBS), the manufacturing purchasing manager’s index (PMI) clocked in at 50.2 in December, unchanged from the previous month. This is the fourth time in 2019 that factory activity has been in an expansionary territory as Beijing has introduced stimulus measures to prop up the industry. The manufacturing PMI was supported by growth in output and new orders and a rebound in exports.

The non-manufacturing PMI came in at 53.5 this month, down from 54.4 in November. The market had forecast 53.6. The decline was attributed to new order growth easing, a drop in employment, and a decline in new export orders. Business confidence also tumbled from last moth’s eight-month high.

This comes days after the NBS reported that the country’s largest industrial companies reported a 5.4% jump in profits, but year-to-date profits were still down 2.1%.

Investors will now look ahead to the Caixin manufacturing, services, and composite PMIs on Wednesday.

The yuan rocked foreign exchange markets when it slipped below the 7 threshold against the US dollar in August and fell to its lowest level against the buck in 11 years. The yuan has since recovered and is trading at a five-month high.

Analysts are bullish on the yuan next year as Beijing’s trade spat with Washington is beginning to come to an end. The yuan has been active on President Donald Trump’s announcement that he will sign the first phase of a trade agreement on January 15 at the White House and the pact will be signed by Vice Premier Liu He.

The USD/CNY currency pair fell 0.34% to 6.9632, from an opening of 6.9868, at 17:40 GMT on Tuesday. The EUR/CNY slid 0.13% to 7.8151, from an opening of 7.8256.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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