Bloomberg pointed out that concerns over a slowdown in China’s economy and rising interest rates on U.S. government bonds are putting downward pressure on the value of the yuan. The yuan fell 0.7 percent to 6.4221 yuan per dollar in the New York market on the 19th (local time). The value of the offshore yuan stood at 6.4257 yuan per dollar as of 10:15 a.m. GMT+8 the 20th.
The yuan broke the 200-day moving average.
Bloomberg said more and more traders are concerned about the impact of China’s COVID-19 blockade.
It also analyzed that the rise in interest rates on U.S. government bonds and the dollar’s value due to the possibility of aggressive monetary tightening by the U.S. Federal Reserve (Fed) also affected the yuan’s value.
Earlier on the 18th, the People’s Bank of China came up with 23 financial support measures, including expanding loans to financial institutions, to support COVID-19 damage and boost the economy.
Simon Harvey Monex, head of European foreign exchange analysis, said, “This is a strong sign that Chinese authorities are concerned about growth conditions,” and explained that the yuan’s weakness reflects this.
China’s GDP grew 4.8 percent in the first quarter. However, retail sales fell 3.5 percent in March, and industrial production growth in March was 5 percent, down from 7.5 percent in January and February, raising concerns.
The People’s Bank of China last week announced a cut in reserve requirements in response to economic shocks.
China’s 10-year government bond rates have been relatively flat this year, but most other countries’ government bond rates have risen. Amid the U.S. Fed’s aggressive tightening stance, the 10-year U.S. government bond rate recently surpassed that of China’s 10-year government bond rate for the first time since 2010. Government bond rates move inversely to prices.
Many predict that the Fed will raise its key interest rate by an additional 0.5 percentage point, but Federal Reserve Bank of St. James Bullard said on the 18th that a 0.75 percentage point hike cannot be ruled out.
As concerns over austerity grew, interest rates on U.S. government bonds rose to a high level, with the 30-year interest rate on U.S. government bonds exceeding 3% for the first time in three years on the 19th.
