This Has Never Happened: Offshore Yuan Cements Record Rally

As tipped earlier, the yuan continues to cement its status as a high-yielding haven.

Coming off its best month since revaluation, the onshore yuan rose to 15-month high on Monday amid tensions on the Korean peninsula, climbing 0.51% as of of 7:01 p.m. in Shanghai. As Bloomberg notes, “the currency climbed 1.35% last week, the strongest showing in CFETS data going back to April 2007.”

That comes after the PBoC strengthened the fix by 0.37%, the most since August 10.

Meanwhile, you already know the story with the offshore yuan. And that story hasn’t changed. In fact, the offshore yuan rose against the dollar for a 14th consecutive session on Monday – that’s the longest streak on record.

Again, that has never happened before.

“Stability outweighs everything before the 19th Party Congress in October — with this expectation, the market may treat the yuan as a safe-haven currency as geopolitical conflicts escalate,” Bank of East Asia’s Kenix Lai notes.

And of course, the rate diffs pillar will support in the event Treasury yields fall on North Korea jitters. “The yuan may see safe-haven inflows as China is the world’s second-largest net creditor with more than $1.73 trillion of net assets as of March,” OCBC’s Tommy Xie said on Monday, adding that “in case of a deterioration in North Korea crisis, the greenback’s yield may drop, widening its yield difference with China and supporting the yuan.”

All of this as Trump threatens to curtail trade with North Korea’s trading partners.