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China’s currency upsets forecasts by beginning the new year stronger

THE omens for the Chinese yuan seemed bad heading into 2017. The capital account looked as porous as ever, making a mockery of the government’s attempts to fix the leaks. The new year, when residents received fresh allowances for buying foreign currency, was due to bring even more pressure. The mighty dollar would be a magnet for Chinese investors as it strengthened still further in the run-up to Donald Trump’s inauguration. Analysts braced for a stampede for the exits from China. The yuan had fallen sharply at the beginning of 2016, catching them by surprise. This time, they were ready.

Instead, the yuan began the year as one of the world’s star performers. This was particularly so in the offshore market, where foreigners trade it most freely. It gained 2.5% against the dollar over two days in the first week of 2017, its biggest two-day increase since 2010, when trading began in Hong Kong, its main offshore hub. Within China itself, price increases were more subdued, but the yuan still climbed to a one-month high.

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GIANT, cross-border mergers in Europe have been rare in recent years. Deals fail to happen even when mid-sized companies—such as family-owned and run specialist manufacturers in northern Italy or the Mittelstand in Germany—have the chance to gain global heft. For that blame founding owner-managers, many of whom are reluctant to lose control of treasured companies. Blame too an artisanal culture, particularly in southern Europe, in which firms’ owners say they are content to remain small and relatively obscure. Occasionally, too, nationalist politicians block efforts by perfidious foreigners to snaffle prized local brands.

Now, though, one of the largest-ever mergers in Europe actually looks set to go ahead. Luxottica, an Italian maker of fancy specs that was founded in 1961—it owns brands such as Ray Ban and Oakley—is to merge with Essilor, a spiffy French producer of lenses. The joint entity is set to combine Italian style with deft French engineering. The deal is supposed to be completed by the end of the year, creating a new entity with a market value of €46bn ($49bn), 140,000 staff and annual revenues of €15bn. It will be...Continue reading

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