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Yuan Hovers Near 16-Month Low Amid Robust U.S. Economic Data and Rising Yields Differentials

January 8, 2025 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from of Li Xing Financial Markets Strategist Consultant to Exness.

The Chinese yuan could remain under pressure against the dollar, hovering near its 2023 low. The currency pair was driven by strong U.S. economic data that fueled expectations of a more hawkish Federal Reserve. The U.S. services sector showed significant expansion in December, with business activity accelerating more than expected and price levels hitting their highest since early 2023. Furthermore, November's job openings surged by 259,000 to 8.098 million, exceeding forecasts and marking a six-month high.

In the bond market, U.S. treasury yields climbed, with the 10-year yields hovering near 4.7%, the highest since late April last year, further strengthening the greenback. Conversely, China's government 10-year bond yields continued their downward trajectory, widening the yield differentials between the two countries' 10-year treasuries to their lowest, intensifying the yuan's weakness.

Market participants will closely monitor today's economic releases, including ADP Employment Change, Initial Jobless Claims, and FOMC minutes. Signs of a robust labor market and a potential delay in the Fed's easing cycle could sustain the dollar's strength. At the same time, the upcoming Trump inauguration could add another layer of uncertainty, with safe-haven flows benefitting the dollar and exacerbating the yuan's decline.

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