Dollar stabilising against Chinese yuan, says O’Neill

Recent developments in the currency markets mean that the yuan may no longer be adjusted simply in reference to the US dollar, says Merrill Lynch Wealth Management’s Bill O’Neill.

Since the beginning of March, the rate of US dollars to Chinese yuan has moved from 6.30 to 6.328.

Rather than reflecting a move on the part of Chinese authorities to again devalue, it signals a stabilisation of the US dollar, says O’Neill, chief investment officer for Europe, Middle East and Africa at Merrill Lynch Wealth Management.

O’Neill says: “The US currency’s downward trend has been stemmed. It recently appears to have begun a gradual process of recalibration against both the yen and the euro, which in turn have begun to exhibit some structural weaknesses of their own.

“It may thus be the case that the yuan will have to be adjusted on the basis of a basket of currencies, and not just solely with reference to the US dollar.”

At this point, investors’ primary concern should be to weigh up this latest currency move against China’s recent commitment to rebalancing the economy to be more domestically-focused, he adds.