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The British pound traded below $1.38 during the third week of July, heading towards a recent two-and-a-half-month low of $1.3737, as England lifted its final coronavirus-induced restrictions amid skepticism among epidemiologists due to a spike in infections. Meanwhile, investors monitored signs of a change in stance at the Bank of England, after policymaker Michael Saunders said last week the central bank could decide to halt its bond-buying programme early amid inflationary pressure. The UK inflation rate hit a three-year high of 2.5% in June. Source: Trading Economics

Commodity prices at a high added to India's widening trade deficit. These are the main reasons that explain the reduced attractiveness of the Rupee. Other factors such as Covid-19 and the announcement of a gradual reduction in interest rates by the Federal Reserve also played a role in this drop. The currency was trading at 74.4563 to the dollar on Monday.

In general, when the USD/CNY spot rate went up, the CSI 300 Index tended to drop. We are now experiencing a similar situation where the dollar is strengthening while Chinese equities are starting to shake. “Some portfolio managers buy foreign equities on an unhedged basis to benefit from the upside in the currency. When there is no clear view that currency appreciation is at hand, that could be a big headwind for Chinese equities.”

Latest #IMF COFER data show global FX reserves (ex-#China) allocated to #RMB continues to rise hitting all time high of 3.1% in Q1 2021. I expect RMB share head towards a 4-6% range, putting it closer to GBP and JPY allocations. That would see more inflows into onshore bonds.

Last week’s tightening drive jolted markets, with a gauge of currencies in the developing world rebounding from its biggest five-day slide in nine months, bolstered by a surprise rate increase in Mexico that lifted the peso almost 2% on Thursday. Recent winners are the Mexican peso, Brazilian real and Hungary’s forint -- currencies whose central banks raised rates this month, protecting their relative yield advantage against accelerating prices and the prospect of rising U.S. rates.