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02:16
How will the yuan-dollar rate move with Janet Yellen as America's new Treasury Secretary? Did you know the Chinese yuan appreciated 10 percent against the dollar in the past six months?
Six months ago, the rate was at 7.17 yuan to a dollar, it's now at 6.46. The dollar had its second worst year in 15 years, largely due to Trump's policy to pursue a weaker dollar to benefit America's exports.
That didn't work well. Now Janet Yellen, the "White Dove," is back as the Biden Administration's Treasury secretary. In the U.S., the treasury secretary is responsible for currency policies.
Yellen said during a recent Senate hearing that the United States does not seek a weaker currency to gain a competitive advantage. So she's going on an opposite path set by Trump and her predecessor Steven Mnuchin. Analysts view her remarks as the return to America's traditional policy letting the markets decide the dollar value.
So what are some of the market factors in play?
First, we should examine China-U.S. relations. Under the Biden administration, though America's competitive attitude towards China won't change, the method may be adjusted. It's believed that an improved bilateral relationship will benefit China's exports and economy and thus help the yuan gain momentum.
Second, if the Biden government gets the pandemic under control quickly and lets the economy rebound, the Fed will weaken monetary easing, meaning printing less money and the dollar will rebound.
Third, the dollar index, which is largely influenced by the economic strength of the U.S. against other major economies in Europe and Japan. If the European and Japanese economies recover faster than the American economy, then the dollar index will go down, and vice versa.
So all in all, the yuan-dollar rate is influenced by a number of factors. The dollar is less likely to go on a one-way depreciation like it did in the past year, but it will face more fluctuations with renewed factors.
