Yuan in biggest weekly gain since January as Trump asks cabinet to draft possible China trade deal

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But analysts believe Trump is merely attempting to influence US equities rally before the midterm elections on Tuesday

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The yuan has strengthened for two days in a row on some positive developments regarding a US-China trade deal. Photo: Reuters

Karen Yeung

Published: 6:14pm, 2 Nov 2018Updated: 3:17am, 3 Nov 2018

The yuan rebounded for a second day on Friday. The currency traded in Hong Kong headed for its biggest weekly gain since January after US President Donald Trump reportedly asked his administration to start drafting the terms of a possible trade deal with Beijing and the central bank set a stronger daily yuan reference rate.

Bloomberg cited unnamed sources as saying that Trump wanted to reach an agreement on trade with Chinese President Xi Jinping at the G20 summit in Argentina later this month, easing concerns over China’s slowing economic growth and capital outflows. However, White House economic adviser Larry Kudlow later denied the claims.

Onshore yuan that is traded in China jumped 1.2 per cent in the past two days to 6.8898 against the US dollar, moving away from the psychologically important level of 7 to the US dollar, which has not been breached since the global financial crisis a decade ago.

Offshore yuan that is traded outside the mainland rose 0.48 per cent on Friday, contributing to a weekly advance of 0.96 per cent – the biggest weekly increase since January 26.

Earlier on Friday, the People’s Bank of China had set a stronger midpoint fixing, its first rise in four days. The onshore yuan is allows to trade up to 2 per cent on either side of the fix.

But analysts believed the news suggested Trump was merely attempting to ensure equities rally ahead of the US midterm elections on Tuesday. The possibility of the Republicans losing control of the Senate and the House would mean Democrats take control of the policy agenda on a wide range of issues, making it more difficult for Trump to pass legislation.