Chinese Yuan Plummets to Seven-Month Low Against US Dollar The Chinese yuan has reached its lowest value against the US dollar in nearly seven months, as economic concerns weigh on the currency. As of Wednesday, the yuan was trading at 6.8267 against the USD, marking a sharp decline since its recent peak of 6.6996 in mid-June. This represents a depreciation of approximately 2.2% in just over two months. The yuan’s weakness is primarily attributed to a combination of factors: * COVID-19 Lockdown Concerns: Renewed COVID-19 lockdowns in major Chinese cities, including Shanghai and Beijing, have raised concerns about disruptions to economic activity and supply chains. * Slowing Economic Growth: China’s economy has been decelerating in recent months, with growth forecasts being revised downward due to pandemic-related restrictions. * US Federal Reserve Policy: The US Federal Reserve’s aggressive interest rate hikes have strengthened the US dollar, making the yuan relatively less attractive to investors. * Geopolitical Tensions: Ongoing tensions between China and the United States over Taiwan and other issues have contributed to uncertainty in the currency market. The depreciation of the yuan has potential implications for both China and global markets: * Exporters Benefit: A weaker yuan could make Chinese exports more competitive globally, boosting demand and supporting economic growth. * Importers Pressured: Conversely, it could increase the cost of imports, putting pressure on businesses that rely on foreign goods. * Inflationary Pressures: A weaker yuan can also lead to higher inflation, as imported goods become more expensive. * Global Impact: The yuan’s decline could have ripple effects on global currencies and trade flows, as it is closely linked to other Asian currencies. The Chinese government has taken measures to stabilize the yuan, including intervening in the foreign exchange market and issuing statements affirming its commitment to maintaining currency stability. However, it remains to be seen whether these measures will be effective in halting the yuan’s downward trajectory.The Chinese yuan hovered around a seven-month low against the US dollar on Tuesday, as stronger central bank guidance offset mixed economic data. Traders were eagerly awaiting US data and commentary from Federal Reserve (Fed) officials for more clarity about potential interest rate cuts.
The Chinese yuan hovered around a seven-month low against the US dollar on Tuesday, as stronger central bank guidance offset mixed economic data. Traders were eagerly awaiting US data and commentary from Federal Reserve (Fed) officials for more clarity about potential interest rate cuts. At 3:56 a.m. GMT, the yuan was 0.01 percent higher at 7.2556 against the dollar, after trading in a range between 7.2539 and 7.2560. Before the market opened, the People’s Bank of China set the mid-rate, around which the yuan can trade within a 2 percent range, at 7.1148 per dollar, stronger than Reuters estimates. Data released on Monday showed that industrial production in China fell short of expectations in May, while the real estate sector remained weak, increasing pressure on Beijing to provide policy support. However, retail sales exceeded expectations thanks to a holiday boost. US retail sales were expected to be released at 12:30 GMT, followed by weekly jobless claims on Thursday and flash purchasing managers’ indexes on Friday. A number of Fed officials were also scheduled to speak at various locations later in the day. Alvin Tan, head of Asia FX strategy at RBC Capital Markets, predicted that the domestic yuan would weaken to 7.30 against the dollar in the coming months due to the strengthening greenback. The yuan has lost 0.2 percent against the dollar this month and 2.1 percent this year. The yield on Chinese 10-year government bonds fell by 0.7 basis points to 2.27 percent, while the yield on comparable US government bonds was 4.3 percent. The onshore seven-day repo rate on the yuan stood at 1.89 percent. The dollar’s six-currency index was 0.123 percent higher at 105,400. The official trade-weighted CFETS index, published on June 14, stood at 99.89, up 2.5 points so far this year.
The yuan has fallen to its lowest level against the US dollar in almost seven months, as the Chinese currency continues to weaken. The yuan fell to 6.9545 per dollar on Wednesday, its weakest level since May 2022. The currency has lost around 3% of its value against the dollar since the start of the year. The yuan’s weakness is due to a number of factors, including the strength of the US dollar, the slowing Chinese economy, and the ongoing trade war between the US and China. The US dollar has been strengthening in recent months, as the Federal Reserve has raised interest rates aggressively in an effort to combat inflation. This has made the dollar more attractive to investors, and has put downward pressure on other currencies, including the yuan. The Chinese economy has also been slowing in recent months, as the government’s zero-COVID policy has weighed on activity. This has reduced demand for the yuan, and has also put downward pressure on the currency. The ongoing trade war between the US and China has also contributed to the yuan’s weakness. The tariffs that have been imposed on goods from both countries have made it more expensive for businesses to trade, and have also reduced demand for the yuan. The yuan’s weakness is a concern for the Chinese government, as it could lead to higher inflation and slower economic growth. The government has taken a number of steps to support the yuan, including intervening in the foreign exchange market and increasing interest rates. However, it is unclear whether these measures will be sufficient to stabilize the currency.
