SINGAPORE: The yuan touched a two-week high on Monday in a firm start to a pivotal week that has markets braced for a wild ride as the U.S. chooses a new leader and likely cuts interest rates, while China’s top legislative body meets in Beijing.

China’s currency opened the onshore session at 7.1040 per dollar, its strongest in two weeks, before drifting a little softer through the morning. In offshore trade the yuan hit its strongest in three weeks at 7.1064 per dollar.

The yuan is seen on the front line of financial markets’ reaction to the U.S. election, particularly if Republican Donald Trump is the winner and hikes tariffs on Chinese goods once he takes office.

One-week implied volatility for the offshore yuan, a measure of options pricing and how far markets think the exchange rate could move, is at its highest since 2015 when China cut the value of the currency after a stock market rout.

Monday’s modest bounce follows the yuan’s largest monthly drop on the dollar in more than a year through October, as a strong U.S. economy and traders’ betting on Trump winning the presidency drove up U.S. yields and the dollar broadly.

China’s yuan weakens as US election jitters heighten volatility

The dollar made a slight, but broad, retreat on Monday following a poll showing Democrat Kamala Harris taking a surprise lead in Iowa. Harris and Trump remain virtually tied in opinion polls and the winner might not be known for days after voting ends on Tuesday.

“The view on dollar has been that it has room to rally on back of a clear election outcome,” said Bob Savage, head of markets strategy and insights at BNY in a note to clients.

The Standing Committee of China’s National People’s Congress (NPC) meets through Nov. 4-8 and is expected to approve spending and debt refinancing plans aimed at shoring up local governments and supporting economic growth.

In the forwards market, three-month yuan was quoted at 7.0547, 548 pips stronger than the spot rate. Three-month CNH forwards were quoted at 7.0555 per dollar.