China’s economy rebounds and interest rate differentials

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

China’s Economy Rebounds, Yuan Strengthens

• China’s economy rebounds from pandemic fallout.
• Chinese yuan has rallied against the US dollar.
• New loans for infrastructure projects fuel the comeback.
• Chinese demand has helped to rally copper.

Interest Rate Differentials and the Demand for US Dollar

• Interest rate differentials tend to vary with how they are measured.
• Measures include central bank, interbank, overnight index swap, and FX rates.
• FX market tends to show a higher US dollar rate against other currencies.
• The higher rate in FX markets could be due to global demand for US dollars.