TOKYO, Oct 20 — The yuan held near a two-year high against the dollar in offshore trade yesterday on signs of a robust economic recovery in China however, doubts about a US stimulus deal capped gains for other risk currencies.

China’s offshore yuan rose as high as 6.6695 per dollar yesterday, surpassing its 2019 peak and hitting its strongest level since July 2018. It last stood at 6.6810.

Data yesterday showing a recovery in China’s consumer sector helped boost not only the yuan but other currencies, including the euro.

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However, broader confidence was later dented by a fall in US share prices as investors grew cautious about prospects of a stimulus deal in Washington.

US House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin “continued to narrow their differences” in a telephone conversation yesterday, her spokesman said.

Pelosi hopes that by the end of today there will be “clarity” on whether a coronavirus stimulus bill can be passed before the November 3 presidential election, he said.

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“Although Pelosi has set a Tuesday deadline for a deal, it does not seem like she has a clear conviction that there will be an agreement,” said Shinichiro Kadota, senior strategist at Barclays.

“Markets probably still think a deal before the election is unlikely.”

In early Tuesday trade, the euro held firm at US$1.17695 (4.88), holding a 0.44 per cent gain made yesterday. The dollar traded little changed at 105.46 yen.

Sterling also held on to small gains made the previous day at US$1.2947.

Britain’s chief Brexit negotiator David Frost said there was no basis to resume trade talks with the European Union unless there is a fundamental change in Brussels’ approach to negotiations.

However, investors still think British and European negotiators might be able to salvage post-Brexit trade talks to prevent disruptions that a no-deal finale to the five-year Brexit drama would cause.

Against the euro, the pound was little changed at 90.88 pence per euro, slowly recovering after hitting a 5 ½-month low of 92.90 pence on September 11.

The Australian dollar is on the defensive after three straight days of loss on mounting speculation about further monetary easing by the Reserve Bank of Australia.

RBA Assistant Governor Chris Kent said Australia’s central bank board is considering further monetary policy easing, including expanding its bond buying programme to include longer-dated government debt.

Traders are focusing on comments from upcoming minutes from the RBA’s policy meeting. — Reuters