Asian shares edged higher on Wednesday as markets continued to recover from the jolt sent earlier this week when Italian Prime Minister Matteo Renzi announced his resignation. The MSCI's broadest index hit two-month highs, showing a rise of 3.4 percent from its November low. Asian shares rose on the coattails of Tuesday's gains in which Italian shares rose 4.2 percent to hit 5 ½ month highs French shares rose to eleven-month highs on Tuesday.
Global currencies stayed fairly stable during Wednesday's morning trading session, with the dollar standing at 114.11 against the yen and the euro finding some support against the dollar's recent rally. The Australian dollar saw some losses on Wednesday, sinking half a cent after GDP data showed the economy contracted for the first time in five years due to spending cuts by consumers and government entities.
Is China in Trouble?
Questions are swirling around whether the Chinese yuan saw a dramatic spike lower on Monday afternoon (u.s. time), with the dollar gaining 8.8 percent against the Chinese currency. Some currency data providers showed that the yuan fell, though neither Reuters nor Bloomberg, two of the most reliable data sources, showed this loss. Data providers such as ICAP and XE who reported the fluctuation began to point fingers at other data sources, even after the corrected the erroneous pricing. Immediately after the announcement of the yuan's crash, analysts began to speculate that it resulted from president-elect Donald Trump's voiced commitment to start a trade war with mainland China. These allegations are not surprising considering the eagerness with which traders are watching Trump's policies unfold and the vast predictions that traders are making for their trades based on his proposed policies.
Though the yuan fell to near eight-year lows after Trump's victory, Monday's slump seems to have been a non-event, though it did show that interest in the currency is on the rise. Technical glitch or not, the yuan is definitely a currency to watch in the coming weeks.
