The yuan is sheltering as safe bet as global markets tumble after announcement of Russia’s attack across Ukraine.
Major currency pairs declined while Yuan reach hovering near four year high.
“Yuan has been trading like a safe haven currency during the Ukraine crisis,” Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore, told Bloomberg.
“Prospects for further easing should see growth recover, hence keeping Chinese equities resilient even as U.S. equities have sold off.”
“Onshore corporates have large holdings of foreign currency receipts due to trade surplus position in recent years,” said Jonathan Cavenagh, senior markets strategist, Informa Global Markets. “That leaves it somewhat immune to outside risk aversion.”
Correlation of the yuan to global volatility dropped to three year low earlier this week which also underscores a heaven status partly due to efforts by Chinese policymakers to ease to support economic growth.
Chinese sovereign bonds saw record inflow of 575.6 billion yuan ($91 billion) in inflows last year, have also been touted as potential alternatives to Treasuries.
“China’s economy has been a little unstable recently, but the authorities have shown great determination to stabilize it since the end of last year,” according to Huang Yiping, Peking University economics professor and former member of the PBOC’s monetary policy committee. “Investors may think that yuan assets including Chinese government bonds can have some safe-haven functions. Although, of course you can’t compare it with the U.S. dollar.”
