Small Exchange: Yuan to stress, riyal steady and euro surges

Andrew Munro 3 July 2017 NEWS

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This week's currency news rounded up.

Dividends to pressure the Chinese Yuan.

Chinese businesses are set to pay out $7.8b in dividends to overseas shareholders in July and $5.9b in August, according to data compiled by Bloomberg. Dividends such as these typically see a surge in demand for foreign exchange, which might be put some pressure on the yuan.

"The need for dividend payouts will pressure the yuan and may pressure a recent increase in China’s foreign reserves," said Xia Le, a Hong Kong-based economist.

The yuan has been volatile of late, with it likely to see a downward trend in the next few months. However, as tests of the new national cybercurrency continue, its introduction may stand to bring further change.

Qatari riyal remains stable

Sanctions and diplomatically tumultuous times in Qatar and neighbouring Gulf states have naturally been seeing an unpredictable Qatari riyal, but as of 3 July the riyal remains near its peg of 3.64 to the dollar. "The market is reflecting reality again," said one Qatari banker.

However, the current diplomatic crisis means the future is uncertain. Some Saudi Arabian media has reported that businesses might have to choose a side. Qatar's National Bank quotes are unchanged from the pre-crisis quotes, while the Qatar central bank has doubled down on its commitment to guarantee all exchange transactions.

Despite everything, the Qatar riyal appears to be going strong as ever.

Euro on the up and up

Fresh from its best quarter since 2010, with the euro posting a 7% gain against the dollar, the euro has seen a 9% increase against the dollar for the year to date. Bullish investors are hopping on board in anticipation of further increases. Others are holding off concerned with the US treasury indicating that it's considering rate hikes.

Whether or not those hikes eventuate, the thought alone is enough to set plenty of other investors on a more cautious path. It's not certain what will happen with the USD:Euro over the coming year, but right now the EU has plenty to celebrate.

Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.

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