Yuan Firm on Hopes for Capital Inflows

The Chinese yuan was strong today together with other Asian countries on hopes that monetary stimulus in developed nations will result in higher capital inflows into the region. Domestic fundamentals were less supportive for the currency though.
Quantitative easing from the Federal Reserve and the European Central Bank fueled speculations that investors will be courageous enough to seek higher yield in China and other Asian markets. Such talks were positive for the yuan, but the currency is in danger from domestic fundamentals. The People’s Bank of China lowered its reference rate by 0.11 percent to 6.2152 per dollar today after increasing it by 0.2 percent yesterday. The services Purchasing Managers’ Index fell from 55.6 to 54.5 in April.
USD/CNY has fallen 0.15 percent this week so far and was little changed at 6.1562 as of 10:49 GMT today.

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