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Chinese Yuan can advance further on US-China trade agreement; APAC currencies might gain further 2-3%

There is no stronger proxy for how investors look at US-China trade tensions than the Chinese Yuan, but other commodities and currency markets also took notice

The price of Gold slipped straight through $1500 to hit its lowest level so far in November around $1485 The Chinese Yuan managed to advance by 0.3% with the USDCNY at one point breaking back below the ever-important support level at 7 Faith that a trade agreement (that lasts) is in place can potentially decline USDCNY all the way to 6.85

By: Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM

If those who watch the market ever needed a reminder at how important positive US-China trade headlines can be to investor sentiment, they received more clarity on Tuesday as optimism builds that both sides will be able to find a resolution.

The price of Gold slipped straight through $1500 to hit its lowest level so far in November around $1485, while the price of US Oil is nearing levels not seen in over two months after appreciating $3 since Friday of last week.

Broader risk appetite can also be noted across a range of asset classes, including US stock markets reaching new record-highs and commodity-linked currencies, such as the Australian Dollar approaching levels close to near 3-month highs.

Read: Asian stocks, currencies gain as investor optimism grows over US-China trade deal

In terms of emerging market trends seen in APAC, the Malaysian Ringgit (USDMYR -0.47%), Indian Rupee (USDINR -0.11%), Indonesian Rupiah (USDIDR -0.32%), Philippine Peso (USDPHP -0.24%) and Korean Won (USDKRW -0.15%) all benefited from coordinated attraction towards emerging market assets, and strengthened against the USD.

Of course there is no stronger proxy for how investors look at US-China trade tensions than the Chinese Yuan.

The Chinese Yuan managed to advance by 0.3% with the USDCNY at one point breaking back below the ever-important, and critical psychological support level at 7.

Hopefully a resolution to US-China trade differences will be found, and while we have been here several times in the past, if investors do hold faith that a trade agreement (that lasts) is in place USDCNY can potentially decline all the way to 6.85.   

The Dollar index (DXY) has gained 0.7% so far this week, briefly breaching the 98.0 psychological mark before easing from its highest levels in nearly three weeks. The DXY continues to demonstrate its resilience against its major peers, strengthening against all G10 currencies so far this week, and has erased its losses since the Fed lowered interest rates on October 30, according to Han Tan, Market Analyst at FXTM .

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