The US dollar has continued to depreciate, dropping to a three-year low versus the yuan on Monday as global investors look for safer assets amid China’s economic rebound from the Covid-19 pandemic.
The greenback is on track for its second consecutive month of loss against a basket of currencies. The offshore yuan was trading at 6.3553 per dollar, its strongest level since May 2018, despite analysts’ warnings that the Chinese authorities aim to curb its rise.
The dollar is down as investors weigh the likely impact of surging consumer price pressures and the Federal Reserve’s stance on US assets. The key PCE price index jumped 3.1% in its largest annual gain since July 1992, due to a recovery from the coronavirus pandemic and supply disruptions.
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According to Ulrich Leuchtmann, Commerzbank’s head of FX and commodity research, the market considers the current inflation levels to be transitional, while next year US inflation will remain at 2.5%.
“That does not make it any easier pricing USD,” Leuchtmann said as quoted by Reuters. “Until we have more clarity the dollar is likely to have found a good balance at current levels,” he added.
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