Dollar down as yuan given more flexibility

Published: 20 Nov at 9 AM Tags: Euro, Dollar,

The US dollar has fallen slightly as the central bank in China announced that it will be pulling back from its usual intervention in the forex market. However, analysts do not believe this will have a long term effect on the greenback as the Federal Reserve looks likely to scale back its massive bond-buying programme as early as March next year. When this happens, the dollar could perform better than rivals like the euro and the yen.

The People’s Bank of China said it intends to expand the yuan to make the currency more flexible. This resulted in more dollar selling and a widening of the yuan’s trading band. However, analysts have said that the result will not have an overnight impact but will be seen over the next five years.

The dollar index is currently down 0.2 per cent to 80.682. The euro has recovered from a low of $1.3486 to gain 0.2 per cent and is currently worth $1.3529.

Elsewhere the Australian dollar has rallied because of the positive news from China, the country’s biggest trading partner, and is trading up 0.3 per cent at $0.9413.

The euro remains under pressure as the European Central Bank clings to its easy money policy and the dollar is also being weighed upon after Janet Yellen, the Fed Chair nominee, announced stimulus measures would remain in place.