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Yuan Value Starts to Reduce in Decline

D. Atika by D. Atika
3 years ago
in Asia Trade

The value of the Chinese yuan, which plunged, began to take a breather as it reduced the decline.

The People’s Bank of China, the central bank of China, announced on the 30th that the yuan’s benchmark exchange rate against the dollar was 6.8802 yuan (median value). Considering that the median price of the previous day’s notice was 6.8698 yuan, the increase was reduced. This is interpreted as sending a signal to the market that the People’s Bank of China does not want an excessive weakening of the yuan.

However, the prevailing view is that the value of yuan will continue to weaken for the time being as the U.S. reiterates its austerity stance. Inside China, there are voices that the Chinese foreign exchange authorities may allow “poch (7 yuan per dollar)” or allow 6.9 yuan.

Bloomberg said, “Many market investors expect to surpass 7 yuan per dollar soon.” Attention is focusing on the possibility of the yuan’s capture, given that the depreciation of the yuan will also increase the bearish pressure of the Korean won.

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On the same day, China’s economic media CheilJaekyung analyzed that the value of the Chinese yuan has plunged since Jerome Powell, chairman of the U.S. Federal Reserve (Fed), made hawkish remarks.

In fact, the yuan’s benchmark exchange rate against the dollar was announced the previous day at 6.8698 yuan, up 0.212 yuan from the previous trading day. In the foreign exchange market, the market closed at 6.9210 yuan per dollar, and in the offshore market, 6.93 yuan per dollar collapsed.

Powell’s remarks on the 26th that he would maintain austerity until inflation (price) is completely resolved are affecting Asian currencies.

The internal situation in China, where the economy is not recovering, also encouraged the yuan to weaken.

In addition, the yuan’s exchange rate is under pressure as the spread with the U.S. interest rate expands as the People’s Bank of China, the central bank of China, cut its benchmark LPR. If the U.S. raises interest rates further, there will be more room for yuan gains. This is why the People’s Bank of China blocked the outflow of foreign exchange by freezing interest rates for six months after cutting the one-year LPR rate in January.

D. Atika

D. Atika

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