The markets recently noticed that Japan’s Yen is at lows not seen since the 1990s. Currency markets will look at China’s yuan next. The market expects Chinese authorities will prefer a weaker yuan to increase its export competitiveness. This is, however, speculation.
Chinese state-owned banks may let the yuan weaken since Japan and South Korea’s currency are falling. That gives the latter two countries an advantage for exports. In the last few months, the yuan traded in a narrow range. Looking ahead, the yuan may drop to between 7.3 per U.S. dollar and 7.5.
Watch China’s inflation report this weekend. A steep deflation in annual producer prices is bad news for the country. Beijing failed to strengthen its economy and increase manufacturing activity. In April, both exports and imports grew. Markets responded by bidding Chinese tech firms like Baidu (BIDU), Tencent (TCEHY), Didi Global (DIDY), and Alibaba (BABA) higher.
Weekly U.S. Jobless Claims
Last week, more Americans filed new unemployment claims. Initial claims for unemployment benefits increased by 22,000. This is 231,000 after seasonal adjustments, a level not seen since last August. The weak job market raises the odds of the Federal Reserve adjusting its overnight interest rate in the 5.25% – 5.50% range. The 20+ Year Treasury Bond ETF (TLT) added 0.49% in response to the weekly job claims report.