December 5, 2022

China’s yuan hovers near record lows against the dollar despite central bank warning

2 min read

Hong Kong
CNN Business

The Chinese Yuan hovered near record lows against U.S. dollar In the offshore market on Thursday, as major currencies around the world continued to fall. Aggressive hikes by the Federal Reserve.

The yuan – also known as the renminbi – has been depreciating for months despite intervention by China’s central bank.

The offshore yuan — which is traded overseas — fell to a record low of 7.2674 on Wednesday morning, then rebounded slightly during the day, according to Refinitiv, whose data goes back to 2010. . On Thursday, it fell again to 7.189 per dollar.

The fall comes despite the People’s Bank of China. Warning Traders on Wednesday Don’t bet on continued currency declines.

The onshore yuan, which trades in a tightly controlled domestic market, recovered slightly on Thursday after falling to its weakest level against the greenback since the 2008 global financial crisis. It was up 0.06 percent at 7.195 per dollar.

Shopkeepers exchange Chinese yuan notes in Beijing, Sunday, July 17, 2022.

The PBOC, meanwhile, has urged traders to “keep gambling”.

“The foreign exchange market is a big deal. Maintaining stability is the first priority,” the PBOC said in a statement published on its website Wednesday. “The People’s Bank of China has extensive experience in dealing with external shocks. have achieved [to the yuan market] and can effectively manage market expectations.”

The Chinese yuan, along with other major global currencies, has weakened sharply against the dollar in recent months. The greenback hit its freshest two-decade high against a basket of major peers on Wednesday, boosted by strong Fed policy.

So far this year, the yuan has fallen more than 13 percent against the dollar, on track to post its worst year since 1994, when China devalued the yuan by 33 percent overnight under market reforms. Decreased.

A sharp devaluation of the currency could cause fresh headaches for Beijing as it could accelerate capital flight.

It could also complicate policymakers’ efforts to stimulate the economy by lowering interest rates. China has eased its monetary policy this year, much to the dismay of the world. Tightening trend to strengthen its economy hit by covid lockdowns and deep real estate crisis.

“We view today’s statement as reflecting the PBOC’s further concerns over the currency’s sharp decline,” Goldman Sachs analysts said in a research note on Wednesday.

However, he also pointed out that the PBOC cannot defend any particular level of the yuan exchange rate, given the depreciation. The broad strengthening of the US dollar.

Pedestrians walk past a currency exchange shop in Hong Kong.

But overall, capital outflow risks are manageable, as China’s capital controls have tightened since 2016.

“China still has a large amount of foreign exchange reserves and banks’ net overseas assets, which accumulated from strong inflow pressures from 2020 to mid-2021, for outflows,” he added. Can also act as a buffer.”

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