The Chinese yuan is trading in a mixed manner against the G10 rivals as investors continue to monitor the developments related to the US-China trade talks. At the same time, investors and speculators are running through numerous news releases to determine the short-term trend of the Chinese currency.
Traders with nerves of steel have valiantly taken a position in the USD/CNY pair, with the hope of making a fortune in a short time. In the past 24 hours, the USD/CNY pair has rallied to 6.7243, after opening at 6.7094.
Earlier this week, a high-level delegation had arrived in Beijing to negotiate and finalize a trade deal with China. There were unconfirmed reports that Beijing and Washington are close to reaching a trade agreement, with President Xi Jinping and President Donald Trump scheduled to meet for a formal signing function later this week or in early April.
Despite these reports, the White House continues to call for the doubling or even tripling of its import of US goods, which is perceived to be difficult due to the current slowdown both in China and other developed countries.
Furthermore, several other reports have been published in the past few days. A recent report from Boao Forum for Asia (BFA), named “Asian Competitiveness Annual Report 2019,” revealed that China took the ninth spot in the list of the most competitive economy in Asia for the sixth time in a row. Regions that took the top spots on the list are South Korea, Singapore, Taiwan, Hong Kong, and Japan.
On the economic front, costs related to overseas borrowing have hit a four-month high. If the overnight borrowing costs increase, it will result in the tightening of liquidity.
Even though Beijing has announced tax reductions across-the-board, there have been reports that the government is planning to introduce a property tax. In this regard, top officials who participated in the annual National People’s Congress disclosed that a draft proposal is being worked out.
However, economists and property developers believe that the economy is growing through a slightly lean phase, which would discourage such a tax initiative. Additionally, regional governments are also against the imposition of such a levy, mainly because municipalities generate a significant portion of their revenues through land sales.
It seems, if the plan is implemented, local officials will assume the role of tax collectors. Notably, such a tax law would affect not only the real estate sector but also the property-related industries, such as cement and steel.
The developments are expected to keep the yuan range-bound in the short-term. An official announcement related to the trade deal could strengthen the yuan.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
