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China’s local currency, the yuan, recorded a slight upward surge against the greenback on Tuesday. This trend resonated with a decline in U.S. Treasury yields, a common investment for risk-averse investors, which saw a decrease overnight. A lower yield on these generally suggests investors are willing to accept lower returns, potentially signifying undervalued markets or economical worries, which in this case, seemed to favor the yuan.
However, the progress of the yuan was somewhat restrained by increasing speculation regarding further monetary easing in the world’s second-largest economy. Monetary easing is a fiscal measure undertaken by central banks to stimulate economic growth by lowering interest rates and hence increasing the money supply. Although it aids in boosting an economy during a downturn, it can also lead to inflation and devaluation of the currency. As such, predictions of these actions within China posed a limit on the gains of the yuan.
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