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Will the Chinese Yuan Surpass the Dollar as the New Safe Haven In 2022?

chinese yuan vs us dollar
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EDITOR'S NOTE: It seems as if it was only yesterday when the world considered the US dollar a safe haven preferable even to gold and silver. With an eye toward practicality and years-long observation of a slow yet still baffling dollar demise, the world’s investors now view the Chinese yuan with the same regard. It’s nearly impossible to see the switch as unsound. As the author details below, there are many mechanisms at play in China. All the while, the US follows the same economic script of fiscal spending. And it does so under the assumption of US dollar dominance (aka, global monetary hegemony). Well, all that’s coming to an end, that is, if you agree with the author’s implicit message. According to him, even a weak yuan can still hold its own against a strengthening dollar, making it something of a potential “game changer” in global monetary affairs. Will this year see a rapid acceleration of the dollar’s decline against the red currency?

The Chinese Yuan was a notable standout in the face of US Dollar’s rise in 2021. Now with its pro-growth policy and speculations about the US Dollar rising against the Yuan, traders are hopeful for a major turnaround in Asian stocks in 2022.

According to Xinhua News Agency, the head of China’s State Taxation Administration Wang Jun said the country will step up tax and fee cuts in 2022 with a view to stabilizing economic growth and high-quality development. According to Jun, these measures are “expected to exceed 1 trillion Yuan.”

Further quantitative easing measures are also expected from the Chinese government in an attempt to bolster economic growth. The National People’s Congress in March and the 20th Party Congress can also exert a major influence on the Chinese Yuan.

In light of the surging domestic cases in China, it may hold on to its tight border controls, keeping the services deficit to the minimum. This in turn will increase the current account surplus which will provide sufficient buffer for the CNY even if the USD strengthens. In addition, China’s COVID-Zero strategy is also imparting some safe haven quality to the currency.

In order to ensure that the Yuan’s value doesn’t act as a brake on Chinese exports, China will adjust the weightings of the key Yuan index basket in 2022. China’s Foreign Exchange Trade System will increase the greenback’s weightings from 18.79% to 19.88% and the Euro’s weightings from 18.15% to 18.45% in the CFETS currency basket.

A strong reason that experts attribute to China remaining resilient despite the pandemic lockdowns and Beijing’s crackdown on the technology and education sectors is its surging exports. The continued high demand of Chinese goods can make the Yuan stronger in 2022. With the Yuan leading from the front, there are enough reasons to believe that Asian stocks may outmaneuver their global counterparts in 2022.

CAD

On Friday, the unemployment rate will be released.The expected rate is 6.6%. If the actual value is less than 6.6%, we expect the CAD to appreciate.

EUR

On Friday, the CPI data will be released. The expected value is 4.7%. If the actual value is more than 4.7%, we expect the EUR to appreciate.

USD

On Friday, the Non-farm payroll data will be released. The expected value is 400K jobs. If the actual value is more than 400K, we expect the USD to appreciate.

Indices

The Dow Jones price could move towards 36200.

Gold and Silver

The price of gold could possibly move towards 1835 and then 1848.

Setups For This Week:

XAUUSD

Primary View:

1. The immediate resistances are near 1835.48 and 1848

2. The immediate support is near 1809

3. The current price seems good for potential buyers

4. Entry on pullback is also possible by keeping the stoploss below 1809

5. The targets could be 1835.48 and 1848

Alternative View:

If the price moves below 1809, we may see further downside movment.

Photo: Axiory Intelligence

CADCHF

Primary View:

1. The immediate resistances are near 0.72320 and 0.72601

2. The immediate support is near 0.71587

3. The current price seems good for potential buyers

4. Entry on pullback is also possible by keeping the stoploss below 0.71587

5. The targets could be 0.72320 and 0.72601

Alternative View:

If the price moves below 0.71587, we may see further downside movement.

Photo: Axiory Intelligence

EURGBP

Primary View:

1. The immediate resistances are near 0.84221 and 0.84368

2. The immediate support is near 0.83604

3. The current price seems good for potential buyers

4. Entry on pullback is also possible by keeping the stoploss below 0.83604

5. The targets could be 0.84221 and 0.84368

Alternative View:

If the price moves below 0.83604, we may see further downside movement.

Photo: Axiory Intelligence

Originally posted on Axiory Intelligence.

 
 

 

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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