Yuan Most Volatile Since Devaluation as Truce Rally Evaporates

(Bloomberg) -- Yuan traders haven’t been this dizzy since China’s shock devaluation roiled markets more than three years ago.

The currency’s 10-day volatility surged above 8 percent Monday, the highest level since August 2015. The wild trading contrasts with the calm that descended on Chinese financial assets less than weeks ago, before a meeting between Presidents Xi Jinping and Donald Trump triggered the yuan’s biggest two-day gain in more than a decade.

Optimism is quickly fading that the 90-day truce agreed to in Buenos Aires will ease tensions between the world’s two largest economies, after the U.S. requested the arrest of a high-profile Chinese executive. While further weakness in the currency may reignite concern it will fall past the key 7-per-dollar level for the first time in a decade, that’s something Goldman Sachs Group Inc. is convinced won’t happen.

The yuan is still stronger than before the G20 meeting. Market observers surveyed in October said China was unlikely to let the yuan weaken past 7 per dollar this year because that could further strain relations with the U.S. and spur capital outflows.

China’s currency rose 0.11 percent to 6.9024 a dollar as of 12:56 p.m. in Shanghai.

To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann

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