China has handled the coronavirus pandemic much better than most of the world. This means that China’s economy is more robust than most countries, including the U.S. This means that China’s currency is going to strengthen against most other currencies.
Biden is China-friendly, and he will end most if not all, tariffs against the country. As Biden goes up in the polls ahead of the election, China’s currency is rising as forex traders go long.
In a global international trade market, this is what should happen to the currencies. China is doing better, and so China’s currency strengthens against the rest of the world, in essence, penalizing China and helping out other struggling countries. Countries like the U.S. that are working with the coronavirus pandemic have their exports cheaper in international trading. It is a global financial system that prevents military conflict and war. However, cheating China hell-bent on global domination will have none of it.
Over the weekend, the People’s Bank of China (PBOC) cut the forex risk reserve ratio for forward contracts — from 20% to zero, according to a central bank statement. What this tells us is that the Chinese are unhappy with the strength of the yuan and are manipulating it lower. Source: https://www.cnbc.com/2020/10/12/china-moves-to-curb-yuan-strength-making-it-cheaper-to-bet-against-the-currency.html
Rohit Garg, director at Bank of America Merrill Lynch, explains the possible reasons why China’s central bank changed rules that made it cheaper for traders to short the currency.