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Yuan Strength Has Markets Guessing as to China's Next Move

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China’s cryptocurrency crackdown escalates, the yuan hits a two-year high and Gulf Arab relations take a confusing turn for the worse. Here are some of the things people in markets are talking about.

China Ramps Up Crypto Crackdown 

China is planning to block access to online cryptocurrency trading platforms and mobile apps, sources say, as the country escalates its crackdown on bitcoin and other digital currencies. Chinese authorities have noticed an uptick in activity on homegrown and offshore platforms since cryptocurrency exchanges were banned last year. Bitcoin traded at $13,799.07 at 6:30 a.m. in Tokyo, according to Bloomberg composite pricing. Up until early last year, China was the most active market for bitcoin trading on exchanges and is still home to some of the biggest bitcoin miners, although mining may become more expensive after some facilities were ordered to close last week. China isn’t alone in increasing its scrutiny: regulators from the U.S. to South Korea have started looking more closely at cryptocurrencies.

The Yuan Powers Ahead

Meanwhile, the Chinese yuan rose to its strongest since December 2015 on Monday, and analysts predict further upside given weakness in the dollar. The onshore yuan rose to as high as 6.4138 per dollar, after the People’s Bank of China strengthened the daily reference rate the most in three months and as the dollar continued to weaken. China’s currency was up 0.48 percent at 5:22 p.m. in Shanghai. In a further boost to the international status of the currency, Germany’s central bank has decided to include it in its own reserves. Bundesbank board member Andreas Dombret said the decision was taken last year following an investment of 500 million euros ($611 million) by the European Central Bank.

More Greenback Weakness

Despite a U.S. holiday, the dollar dominated trading on Monday as it headed for a fourth day of declines, weakening against every major currency. Bloomberg’s dollar index approached its lowest level in three years as the euro extended gains that have pushed it to the strongest since 2014. The Aussie and kiwi advanced the most of G-10 currencies. Meanwhile metals powered higher, with gold rallying to a four-month high and copper jumping by the most in two months. Australian equity futures signal a muted start to Tuesday trading, while contracts point to declines in Japan.

The End of ECB Bond Purchases? 

The European Central Bank shouldn’t have any problems ending net asset purchases in one swoop after September, Governing Council member Ardo Hansson said Monday. “The last step to zero is not a big deal any more,” Hansson said, arguing the ECB should adjust its policy guidance before the summer. “I think we can go to zero in one step without any problems.” The euro extended gains after the comments were published and the yield on 10-year German bonds rose. In an account of the central bank’s December meeting, ECB policy makers said they’re open to tweaking their policy guidance soon to align it with a strengthening economy.

A Confusion of Gulf Claims

A cascade of allegations and denials is escalating the feud among Gulf Arab monarchies. Two commercial jets bound for Bahrain were intercepted Monday, the United Arab Emirates’ official news agency reported. But according to Qatar, no such thing ever happened. A day earlier, Qatari royal Sheikh Abdullah Bin Ali Al-Thani said he was forcibly detained by the U.A.E., an accusation the nation denies. Concerns are growing that conflict between Qatar and the four Arab nations that cut links with the gas-rich country in June may be escalating again. Saudi Arabia, the U.A.E., Bahrain and Egypt accused Qatar of supporting terrorism in the region. Qatar denies the allegation. Risk advisory firm Alef Advisory says neither side is interested in compromise. 

What we’ve been reading

This is what caught our eye over the last 24 hours.

— With assistance by Steven Yang, Piotr Skolimowski, Alessandro Speciale, Zainab Fattah, Helen Sun, and Xiaoqing Pi

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