Data: FactSet; Chart: Axios Visuals

The dollar strengthened against most of the world's currencies last week, as traders bought the greenback expecting an end to the reflation trade, but China's currency bucked the overall trend (pun intended) and is on pace for its strongest month against the dollar since 2008.

Why it matters: "What we do see is a strong Chinese economy, which is part of what’s behind the strong renminbi," Jason Brady, president and CEO of Thornburg Investment Management, told WSJ.

What's happening: Investors have boosted Chinese stock and bond buying thanks to the equity market's strong rally and yields on 10-year government debt that recently topped 3% — around 230 basis points above comparable U.S. yields.

  • “More and more people are coming in, and it’s only the beginning,” Jan Dehn, head of research at Ashmore, told FT. “Asia markets are going to make their way into all the major global bond indices.”

The big picture: The Chinese government has acted to keep its currency weak in the past, but both the onshore and offshore renminbi, or yuan, have strengthened significantly in the third quarter. That suggests the government has been more willing to allow market forces to move the currency.

  • The strength of its exports over the past three months suggests that the currency's value has not hurt demand.

Watch this space: A recent article in the state-run China Daily newspaper noted that authorities plan to remove more barriers to using the renminbi internationally in an effort to "further promote the financial structural reform" and "create a level playing field for the renminbi and other major convertible currencies."

  • "We are improving our financial market regulations in order to integrate into the global financial market," Zhang Xuechun, a deputy director general at China's central bank, said in the article.

Why you'll hear about this again: China's strict currency controls are the major reason the yuan has not been used more in global trade and Chinese assets have not been more popular among global investors. Changing that could mean an avalanche of overseas investment funds flowing into China.

Go deeper

Dion Rabouin, author of Markets
Oct 23, 2020 - Economy & Business

Turkish lira's crash shows the value of central bank confidence

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Data: FactSet; Chart: Axios Visuals

The value of the Turkish lira against the dollar fell more than 2% immediately following the central bank's decision not to adjust its benchmark one-week repo rate, sending the currency plummeting to its lowest level on record.

Why it matters: Turkey is becoming a cautionary tale of what can happen when a central bank loses its independence and credibility and is effectively controlled by the president.

Dion Rabouin, author of Markets
Oct 22, 2020 - Economy & Business

PayPal brings bitcoin to the mainstream

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Data: Investing.com; Chart: Axios Visuals

PayPal's decision to allow customers to hold bitcoin and other virtual currencies in its online wallet and shop using cryptocurrencies sent the value of bitcoin soaring on Wednesday.

Why it matters: With 346 million active accounts around the world and 26 million merchants, PayPal could bring cryptocurrencies into mainstream acceptance.

Pence to continue traveling despite aides testing positive for COVID-19

Marc Short with Pence in March. Photo: Drew Angerer/Getty Images

Marc Short, Vice President Mike Pence’s chief of staff, tested positive for the coronavirus Saturday and is quarantining, according to a White House statement.

Why it matters: Short is Pence's closest aide, and was one of the most powerful forces on the White House coronavirus task force. Pence and second lady Karen Pence tested negative for the virus on Sunday morning, according to the vice president's office.