July 5 (Reuters) – During periods of uncertainty when risk aversion is evident as it is today there are two currencies traders can rely on as stores of safety, the US dollar and China’s yuan.
The dollar as the world’s reserve and most liquid currency is an obvious port of call and with an 18-percent gain unfolding since taper talk emerged last year unsettling financial markets, it’s clearly a profitable way to ride out the storm.
China’s yuan which is only tradable for most in its offshore guise (CNH) is not an obvious contender as a safe asset but has proved to be one.
The offshore yuan is liquid and a big rally during the COVID-19 pandemic which saw a record high traded in March this year merits attention. A fresh bout of uncertainty has spurred another rise and with a massive current account to support it, and China loosening policy to support the economy when others are forced to tighten to fight inflation, curbing their economies, the yuan could be a wise place to park some cash, spreading risk away from the dollar.
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own; editing by David Evans)