TRUMP IS HURTING THE USD, BUT AIDING THE CHINESE YUAN

It hasn’t been the best of years for yuan bears. China’s currency has gained 4.2% year to date. The yuan has found support from an unexpected source — President Donald Trump.

Political turmoil in the U.S. has dented the dollar, with everything from Trump’s comments on Charlottesville to threats of a government shutdown taking a toll.

That’s thrown up an unusual relationship: Since the start of the year, the correlation between the RealClearPolitics Trump Job Approval Poll Average, and the dollar-yuan exchange rate, has run at 0.75.

Yuan bears might not be delighted, but for the People’s Bank of China it has the trappings of a Goldilocks outcome.

  • Dollar weakness this year means the yuan has strengthened against the U.S. currency — helping curb capital outflows —
  • Down on a trade-weighted basis – good for exports.