Yuan Rally Fuels Record $99.9B Forex Sell-Off

Samantha Luan

Data Interpretation

Forex

Remarks of Officials

Economic

Central Bank

Traders' Opinions

Stocks

Summary:

Chinese banks processed record foreign currency sales, underscoring a massive client shift into the yuan.

Chinese banks processed a record volume of foreign currency sales for their clients in December, as expectations for a stronger yuan and seasonal demand converged to drive a massive shift into the local currency.

Data from the State Administration of Foreign Exchange released Thursday shows that onshore lenders sold a net $99.9 billion in foreign exchange on behalf of clients. This figure is more than six times the amount recorded in the previous month, reflecting a broad-based move by both corporations and investors to position for gains in the yuan.

What's Driving the Yuan's Strength?

The yuan has been the best-performing currency in Asia over the past month, strengthening by over 1% against the U.S. dollar and breaking below the key psychological level of 7 per dollar. The rally is underpinned by several key factors:

• Broad Dollar Weakness: A general decline in the U.S. dollar has provided a significant tailwind for the yuan.

• Swelling Trade Surplus: China's robust trade performance continues to generate strong foreign currency inflows.

• Economic Optimism: Positive sentiment around China's economic growth has supported advances in the country's onshore stock markets.

• Seasonal Demand: December typically sees a spike in currency settlement activities, as exporters convert foreign earnings into yuan to meet year-end operational needs.

A Shift in Market Expectations

Analysts see the data as clear evidence of a change in market sentiment. According to Xiaojia Zhi, an economist at Credit Agricole CIB, the figures point to "a notable shift in market expectation around the yuan toward appreciation." Zhi attributed this change to "weaker dollar expectations and more positive sentiment around China equities," noting a rotation out of U.S. tech stocks and into Chinese ones.

This market-driven appreciation appears to have the tacit approval of policymakers. The People's Bank of China has been setting the yuan's daily reference rate at progressively stronger levels, signaling its tolerance for a managed rise in the currency's value. Thursday's fixing was the strongest since May 2023.

Wall Street Revises Yuan Forecasts

As the yuan continues to climb, major global banks are upgrading their forecasts.

Morgan Stanley recently revised its first-quarter prediction for the yuan to 6.85 per dollar, a significant strengthening from its previous forecast of 7.05. Similarly, Australia & New Zealand Banking Group now expects the currency to reach 6.85 by the end of the year, while Macquarie Group anticipates a level of 6.8.

Future Catalyst: A Stockpile of Unsettled Dollars

Another potential driver for the yuan lies in the vast holdings of foreign currency held by Chinese companies. Zhongtai Securities estimates that exporters have accumulated approximately $930 billion in unsettled foreign exchange since 2022.

If these firms decide to convert a portion of this stockpile into yuan, it could create another powerful wave of support for the currency. "We expect firms to turn more willing to sell foreign exchange in 2026, which will form a positive conjunction with yuan appreciation," analyst Zhang Deli noted.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Edward Lawson

Political

Commodity

Remarks of Officials

Economic

Traders' Opinions

Energy

Figure 1: The oil tanker Nave Photon, carrying crude from Venezuela, is pictured docked at Port Freeport in Texas on January 15, 2026.

US Begins Selling Venezuelan Crude at a Premium

The United States is now selling Venezuelan crude oil at prices approximately 30% higher than the previous government achieved, Energy Secretary Chris Wright announced Thursday. This development follows an operation by U.S. special forces that captured former Venezuelan President Nicolas Maduro earlier this month.

Washington has already completed its first sale of Venezuelan oil, valued at around $500 million, a U.S. Department of Energy spokesperson confirmed. More sales are anticipated in the near future.

"We're getting about a 30% higher realized price when we sell the same barrel of oil than they sold the same barrel of oil three weeks ago," Wright stated at a U.S. Energy Association event, without providing specific price points.

Trump Outlines Plan for Future Sales and Investment

The initial oil sales are just the beginning of a longer-term strategy. President Donald Trump said last week that Venezuela would transfer between 30 million and 50 million barrels of crude oil currently under U.S. sanctions. He confirmed the oil would be sold at market rates, with the proceeds controlled by him to benefit both nations.

According to the Department of Energy, these oil sales are set to continue "indefinitely."

Furthermore, Trump announced last Friday a plan for oil companies to invest at least $100 billion to rebuild Venezuela's struggling energy sector. He added that the U.S. would provide security to help ensure investors see strong returns.

Oil Majors Remain Cautious Despite White House Push

To discuss the investment plan, President Trump met at the White House with leaders from major energy firms, including Exxon, Chevron, ConocoPhillips, Halliburton, Valero, and Maratho.

However, the industry appears hesitant. Exxon CEO Darren Woods reportedly told Trump that the Venezuelan market is "uninvestable" in its current condition. This caution is rooted in history; Venezuela seized assets from Exxon and Conoco in 2007, and the companies are still owed billions of dollars from arbitration cases.

Market Impact and The Political Hurdle

These developments are unfolding as global oil markets contend with a supply surplus that has been putting pressure on prices. As of 8:33 p.m. ET, Brent futures were up a slight 0.14% to $63.85 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.2% to $59.31.

Venezuela possesses the world's largest proven crude reserves, estimated at 303 billion barrels. Yet, years of underinvestment have decimated its production, which has fallen from a peak of 3.5 million barrels per day (bpd) in the 1990s to around 800,000 bpd today.

Baron Lamarre, co-founder of Index and former head of trading at Petronas, argued that the core issue isn't technical but political.

"Venezuela's oil problem is not technical, and it is not commercial, it's fundamentally human and political," he said. "Until investors have confidence in long-term political continuity, capital will remain cautious, incremental, and conditional."

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Nathaniel Wright

Data Interpretation

Remarks of Officials

Economic

Central Bank

China–U.S. Trade War

China's economy hit its official 5% growth target for 2025, but a closer look reveals an unbalanced recovery. While record-breaking exports powered the nation's performance, stubbornly weak spending at home dragged growth to its slowest pace in three years, raising questions about the sustainability of its economic model.

In the final quarter of 2025, the country's gross domestic product (GDP) expanded by just 4.5%, highlighting a significant loss of momentum. This slowdown, influenced by the lingering effects of Donald Trump's trade war, underscores a critical weakness: China's reliance on selling to the world while its own consumers and businesses hold back.

A Record Trade Surplus Masks Domestic Fragility

The standout success story for China's economy in 2025 was international trade. The country achieved a massive trade surplus of nearly $1.2 trillion, meaning it sold far more goods abroad than it purchased.

This export boom was impressive, especially as sales to the United States dropped by about 20% due to trade tariffs. To compensate, Chinese exporters successfully pivoted to other global markets, increasing sales to Africa, Southeast Asia, Europe, and Latin America. These strong export figures were the primary driver that enabled Beijing to meet its annual growth target.

Inside China: Stagnant Spending and Deflation Risks

The strength in exports, however, paints a misleading picture of the economy's overall health. Back at home, the story was one of stagnation.

• Weak Consumer Demand: Chinese consumers were reluctant to spend, leading to sluggish retail sales.

• Low Business Investment: Companies showed little appetite for expansion, with fixed-asset investment—a major engine of economic activity—either falling or growing only slightly in 2025.

This persistent lack of domestic spending has pushed the economy toward deflation, a cycle of falling prices. When consumers and businesses expect prices to drop further, they delay purchases, which in turn slows down economic activity even more. The clear imbalance between a booming export sector and a sluggish domestic market points to fundamental structural issues.

Beijing's Policy Crossroads: How to Boost the Homefront

Chinese leaders have acknowledged the need for a strategic shift away from export dependency and toward an economy driven by domestic consumption. The challenge now is figuring out how to unlock spending and boost confidence among households and businesses.

One primary tool is monetary policy. China's central bank has already started cutting some interest rates to make it cheaper for families and companies to borrow money for homes, new ventures, and other purchases. These cuts have targeted key industries like technology and agriculture, but broader stimulus may be needed.

Looking ahead, the road appears challenging. Economists forecast that growth could slow further to around 4.5% in 2026. If the global demand for Chinese exports weakens, Beijing will have to rely more heavily on other policies, such as increased government spending, to prop up the economy.

For Chinese families and workers, this economic environment likely means slower income gains and fewer new jobs until consumer confidence recovers. Small businesses, from local stores to restaurants, will continue to face pressure if people choose to save rather than spend. For now, China's powerful export machine remains the key pillar holding its economy aloft.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Samantha Luan

Political

Economic

US companies are more upbeat about doing business in China after a trade truce between President Donald Trump and Chinese leader Xi Jinping, according to a survey by the American Chamber of Commerce in China.

About 48% of respondents said they're optimistic about China's market growth over the next two years, up 11 percentage points from the previous year. Another 27% remained neutral.

Relations between Washington and Beijing have steadied after Trump and Xi met in South Korea on Oct. 30, where they struck a trade truce and agreed to pause tariffs on each other for a year. The two leaders are slated to meet four times in 2026, including a likely visit by Trump to China in April, though his recent tariff threats over Iran risk triggering new tensions.

Most surveyed firms remained downbeat about US-China relations over the next two years, but the level of pessimism moderated to 52% from 65% in the previous report, AmCham said.

The survey also challenges the idea that multinationals are rushing to move operations out of China amid concerns over US tariffs. About 71% of respondents said they have no intention to relocate their business overseas, citing China's strategic importance as a key reason for staying.

About 57% of US companies said they plan to increase investment in China, driven by the country's long-term market potential and strategic value. Those looking to scale back cited uncertainty in bilateral relations and worries about economic growth.

Companies' financial performance improved in 2025 as well. About 52% of firms reported being profitable or very profitable, up six percentage points compared to the previous year. The services sector recorded the strongest gains, with 61% of companies reporting profitability.

Still, many firms reported continued non-tariff barriers over the past year, including slower customs clearance, delays in licensing and approvals, as well as tighter export control regulations as a result of trade tensions.

The survey was conducted from Oct. 22 to Nov. 20, and drew responses from 368 member companies.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Changing Tastes In A Traditionally Neutral Market

Car colour is rarely treated as a core commercial indicator, yet it often mirrors broader shifts in consumer sentiment. In recent years, UK buyers have gravitated toward muted tones such as grey, narrowing the visual diversity of the market. This prompted public calls from industry leaders, including Fiat chief executive Olivier Francois in 2023, to reintroduce more expressive colour options.

The transition toward electric vehicles has added a new layer to these preferences. According to the Society of Motor Manufacturers and Traders, green tinted cars sold in 2025 reached their highest volume in 20 years, marking a notable departure from the long standing dominance of neutral shades.

Electric Vehicles And The Rise Of Green

British motorists purchased 99,793 green cars in 2025, an increase of 46.3 percent compared with 2024. These vehicles accounted for almost 5 percent of total car sales during the year. The SMMT noted that many buyers increasingly associate the colour green with the country’s broader decarbonisation push, suggesting that visual identity is becoming intertwined with environmental intent.

This shift has unfolded alongside rapid electrification of the UK car market. Electrified vehicles, including battery electric, hybrid electric and plug in hybrid models, reached a combined market share of more than 48 percent last year. This expansion has been supported by a national framework targeting net zero carbon emissions by 2035, reinforcing the link between policy direction and consumer behaviour without implying a direct one step outcome.

Battery Electric Models Drive The Trend

Within the green segment, battery electric vehicles showed particularly strong growth. Sales of green tinted battery electric cars almost doubled to 23,249 units, according to the SMMT. This development reflects how EV adoption is influencing not only drivetrain choices but also aesthetic decisions, as buyers align product appearance with perceived environmental values.

While colour alone does not alter emissions performance, the coincidence of rising EV adoption and increased demand for green vehicles suggests a broader cultural alignment taking shape within the market.

Manufacturers Respond To Evolving Demand

Automakers are adjusting to these changes by broadening their offerings. SMMT chief executive Mike Hawes said manufacturers are expanding model ranges, colour palettes and finishes to match shifting consumer preferences. This response reflects a recognition that design choices can reinforce brand positioning in an increasingly competitive EV landscape.

Taken together, the surge in green car sales illustrates how the electric transition is influencing consumer expression as well as technology uptake. As electrified vehicles approach half of all UK car sales, subtle markers such as colour are becoming part of the narrative of change shaping Britain’s automotive market.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Forex

Stronger Data Reinforces Dollar Momentum

The US dollar extended its recent strength and was positioned to secure a third weekly advance, supported by economic indicators that suggest the US economy remains resilient. The greenback rose earlier in the week following an unexpected decline in weekly jobless claims and then held steady during Asian trading hours. These developments have contributed to a reassessment of how soon the Federal Reserve may begin easing policy.

Initial claims for state unemployment benefits fell by 9,000 to a seasonally adjusted 198,000 for the week ended January 10, significantly below the Reuters survey forecast of 215,000. This data point has been interpreted as evidence of labor market stability. The link between stronger employment indicators and reduced expectations for rate cuts reflects a causal transmission channel through monetary policy expectations rather than a simple statistical coincidence.

Rate Cut Expectations Shift Further Out

Fed funds futures have pushed expectations for the next interest rate cut to June, reversing earlier assumptions that easing could begin sooner. This shift follows not only the improvement in employment related data but also comments from central bank officials emphasizing lingering inflation risks.

Chicago Fed President Austan Goolsbee stated that the central bank should prioritize lowering inflation, citing ample signs of stability in the labor market. Kansas City Fed President Jeff Schmid described inflation as still too hot, while San Francisco Fed President Mary Daly said recent US economic data appeared encouraging. Together, these remarks have reinforced the perception that policymakers remain cautious about easing too quickly. The relationship between hawkish rhetoric and dollar strength reflects correlation through market expectations rather than direct policy action.

Currency Performance Across Major Markets

The dollar index, which tracks the US currency against a basket of major peers, was little changed at 99.36 but remained on course for a weekly gain of 0.2 percent. The euro traded steadily at 1.1607 dollars, showing limited reaction to the shifting US outlook.

The Japanese yen strengthened slightly by 0.05 percent to 158.58 per dollar, though it was still set to weaken around 0.5 percent over the week. Current levels continue to raise the risk of intervention by Japanese authorities, who have repeatedly warned against one way moves in foreign exchange markets. Brief rebounds in the yen have tended to coincide with such warnings, a pattern that reflects correlation rather than a lasting shift in currency fundamentals.

Japan Policy Uncertainty Adds Pressure On The Yen

The yen has been under pressure as investors factor in the possibility that Prime Minister Sanae Takaichi could gain greater scope to pursue fiscally expansionist policies, depending on the outcome of a snap election expected early next month. At the same time, expectations of near term tightening by the Bank of Japan remain limited. According to a Reuters poll published on Thursday, economists expect the BOJ to wait until July before raising its key interest rate again.

This divergence between US and Japanese policy expectations continues to weigh on the yen through a causal interest rate differential channel, reinforcing demand for the dollar.

ECB Stability And Global Policy Context

Elsewhere, European Central Bank chief economist Philip Lane said the ECB would not debate interest rate changes in the near term if the euro zone economy remains on track. However, he cautioned that new shocks, including a potential deviation by the Federal Reserve from its mandate, could disrupt the outlook. The ECB has held rates steady since ending a rapid easing cycle in June and has signaled little urgency to adjust policy again.

The contrast between a steady ECB stance and a Fed perceived as firmly focused on inflation control has contributed to ongoing dollar support, reflecting relative policy expectations across jurisdictions.

Other Currencies And Digital Assets

The Australian dollar was little changed at 0.6699 dollars, while the New Zealand dollar edged up 0.05 percent to 0.5745 dollars. In cryptocurrency markets, bitcoin rose 0.2 percent to 95,760.92 dollars and ether gained 0.8 percent to 3,323.82 dollars.

Overall, the dollar’s advance continues to be underpinned by data that challenge assumptions of imminent Fed easing, with market pricing increasingly reflecting a higher for longer interest rate environment.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Winkelmann

Stocks

China is pulling the plug on a key advantage held by high-frequency traders, removing servers dedicated to those firms out of local exchanges' data centers, according to people familiar with the matter.

Commodities futures exchanges in Shanghai and Guangzhou are among those that have ordered local brokers to shift servers for their clients out of data centers run by the bourses, according to the people, who said the move was led by regulators. The change doesn't only affect high-frequency firms but they are likely to feel the biggest impact. The Shanghai Futures Exchange has told brokers they need to get equipment for high-speed clients out by the end of next month, while other clients need to do so by April 30, the people said.

The clampdown will hit China's army of domestic high-frequency firms but will also impact a swathe of global firms that are active in the country. Citadel Securities, Jane Street Group and Jump Trading are among the foreign firms whose access to servers is being affected, the people said, declining to be named as the matter is private.

The changes threaten a speed advantage that high-frequency traders, made famous by Michael Lewis' bestseller Flash Boys, and quant hedge funds have long used to beat rivals. By using servers located in the exchanges' own data centers, these firms can get slightly quicker execution than others — an edge in markets where every millisecond counts.

Trading firms don't directly place their servers within the exchanges but they can do so with the help of local brokerages, who offer the service as a way of securing business. Some Chinese brokers are shifting high-frequency clients' servers out of the Shenzhen Stock Exchange's data centers, one person said.

Representatives for China's securities regulator and Citadel Securities didn't respond to requests for comment. Jane Street, Jump and Hudson River declined to comment.

The move is the latest sign that officials are focused on levelling the playing for investors and ensuring market stability after stocks rallied to multi-year highs this month. Regulators tightened rules on margin trading earlier this week in a bid to cool leveraged bets. They have also scrutinized some ETF trades by foreign market makers.

Futures exchanges have made preliminary plans to add two milliseconds of latency to any servers that connect from third-party computer rooms, two of the people said. It's not clear if other exchanges are considering the same approach.

The delay will be in addition to the time lag trading firms experience from moving servers away from exchanges, the people said.

A delay of just a few milliseconds would be imperceptible to most investors but it could be enough to impact global firms' high-frequency trading in stock index futures, convertible bonds and commodities. Some of their trading strategies may not be viable without the fastest access, though it's unclear how the firms might adapt as they try to stay a step ahead of rivals.

It's unclear whether the timing and details of the changes will apply uniformly across brokers and exchanges.

Chinese quants had assets under management of around 1.7 trillion yuan ($244 billion) by June, according to estimates by Citic Securities Co., a local investment bank. But global giants like Tower Research Capital, Jump and Optiver Holding BV have regularly managed to beat local players, especially in the futures market, according to the people. Optiver declined to comment. Tower didn't respond to requests for comment.

China's stock exchanges define high-frequency trading as more than 300 orders and cancellations per second through one account or more than 20,000 requests in a single day. Such accounts dropped 20% in 2024 to about 1,600 as of June 30 that year, the China Securities Regulatory Commission has said.

The attempt to shift high-frequency traders away from exchanges comes after Beijing's years of unease with these firms, who add liquidity to markets but also enjoy execution advantages that are unthinkable for mom-and-pop investors.

Two years ago, regulators imposed tighter rules on automated stock trading. Officials have also threatened to raise fees on high-frequency traders, although so far they haven't done so.

Officials elsewhere have also made moves to curb the advantages of high-speed traders. Last year, Thailand's stock exchange said it would tighten rules on high-frequency trading, part of a wider move to restore market confidence.