Yuan at 16-month high on upbeat China data, dollar in decline

(Reuters) – World stocks rose on Tuesday on the back of upbeat Chinese data and optimism about novel coronavirus vaccines, as a struggling dollar kept the hot streaks for the euro and some of the biggest emerging market currencies sizzling.

The euro’s fifth day of gains made for a slow start in continental Europe but a solid 0.8% rise on London’s international and commodity-heavy FTSE maintained the overnight momentum from Asia and Wall Street.

The eye-catching move was a 16-month high for the yuan. A 5.6% jump in Chinese industrial output in August was the best since before the spread of the coronavirus and retail sales grew for the first time this year.

“Strong external demand, a further recovery from the pandemic and pent-up demand from the floods all contributed to the robust activity data in August,” Ting Lu, chief China economist at Nomura, said in a note to clients.

“We expect a further, albeit gradual, recovery of the services sector, a steady improvement in retail sales and elevated fixed-asset investment growth.”

With sentiment also boosted by hopes for a COVID-19 vaccine after British drugmaker AstraZeneca restarted its vaccine trial and the dollar extending recent losses, other currencies were also on the rise.

The euro was up 0.2% at $1.1891 ahead of Germany’s monthly ZEW sentiment survey, the Australian and Kiwi dollars both gained as did Britain’s pound as traders showed little reaction to the government winning an initial vote on its new Brexit bill.

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