China’s Yuan Surges on Election Relief

The yuan has hit its strongest position in more than two years, as investors bet a Democratic president and a divided Congress could lead to reduced U.S.-China tensions and a weaker dollar.

On Monday trading in Hong Kong, the offshore yuan rallied about 0.54% to 6.5573 to the dollar, levels last seen in June 2018, after the Associated Press’s weekend declaration that former vice president Joe Biden had won the presidency. The dollar weakened more broadly, with the WSJ Dollar Index dropping 0.17% to 87.04, also reaching levels last hit in 2018.

“Investors think that China will get some room to breathe,” said Zhou Hao, an economist at Commerzbank in Singapore. He said while Mr. Biden might not remove all of the tariffs that President Trump had introduced on Chinese goods, further levies weren’t the president-elect’s preferred course of action.

The Trump administration has stepped up pressure on China in the past two years over trade, technology and global influence. It has introduced trade tariffs, visa bans, sanctions and other restrictions on individuals and companies. Tariffs in particular have pressured the yuan, and in August 2019 the currency broke below 7 yuan per dollar, a level authorities had previously defended.
More recently the yuan has rebounded, as China became the first major economy to return to growth after battling the pandemic, and as polls gave Mr. Biden the lead. Data Saturday showed China’s exports grew by a forecast-beating 11.4% year over year in October.