The Chinese yuan is expected to remain under pressure against the U.S. dollar, as recent strong economic data from the U.S. supports a hawkish stance from the Federal Reserve. The services sector in the U.S. showed unexpected expansion in December, with business activity accelerating significantly and price levels reaching their highest since early 2023, reflecting a robust economic landscape that could lead to tighter monetary policy.
Moreover, with November's job openings surging to a six-month high, the U.S. economy appears resilient, which reinforces expectations for higher interest rates. The climbing U.S. treasury yields, especially the 10-year yields nearing 4.7%, contrast sharply with the downward trend of China's 10-year bond yields. This divergence in yield is a key factor contributing to the yuan's current weakness against the dollar.
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