USD/CNH declines towards 33-month low to near 6.9310 as Yuan gains on seasonal demand

• USD/CNH approaches the 33-month low to near 6.9310 as Chinese Yuan capitalizes on seasonality.
• The US Dollar faces slight selling pressure due to partial US government shutdown.
• Kevin Warsh’s nomination for Fed Chairman and upbeat US ISM Manufacturing PMI have strengthened the US Dollar.

The USD/CNH pair trades lower to 6.9350 during the late Asian trading session on Tuesday. The pair declines towards its 33-month low of 6.9310 as the Chinese Yuan (CNH) continues to outperform the US Dollar (USD) due to strong seasonal demand.

According to a note from China’s Ping An Bank, the upcoming spring festival holiday, combined with a weak dollar trend and seasonal demand for currency settlement, are continuing to support the yuan, Reuters reported.

Though investors have underpinned the Chinese Yuan against the US Dollar (USD) due to seasonality trend, the latter has broadly turned strong against its major currency peers, following the nomination of former Federal Reserve (Fed) governor Kevin Warsh as the successor of Chairman Jerome Powell.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops slightly lower to near 97.45, but is still close to its weekly high of 97.73.

The US Dollar has retraced marginally due to partial US federal shutdown, which will result in the suspension of key economic data releases.

On Monday, upbeat US ISM Manufacturing Purchasing Managers’ Index (PMI) data for January also supported the US Dollar. The ISM reported that the Manufacturing PMI returned to growth after declining for several months. The data came in at 52.6, higher than estimates of 48.5 and the prior release of 47.9. A figure above 50.00 is seen as an expansion in the business activity.