Offshore yuan strengthens as China shifts to looser monetary policy

The offshore yuan strengthened past 7.28 per dollar, maintaining its rebound from the five-month low of 7.3 on December 3rd, as significant pledges of economic support from the Chinese government raised expectations of a potential recovery.

Offshore yuan strengthens as China shifts to looser monetary policy

The Politburo announced a shift to a “moderately loose” monetary policy for next year, moving away from the “prudential” stance held over the past decade. Additionally, the government committed to implementing “more proactive” fiscal measures rather than the previous “proactive” approach. This shift and promises to support equity markets and property prices boosted investor confidence, leading them to believe the Chinese government might extend its 5% GDP growth target into next year. This has supported the local currency and increased export expectations despite the potential impact of loose monetary policy.

Stronger domestic demand seen offsetting tariff risks as investors await economic plans

The prospect of stronger domestic demand could also help counterbalance potential tariff threats from U.S. President-elect Trump. Investors are now looking to the Central Economic Work Conference for further details on economic support.