China’s yuan hovered near record lows against the US dollar in the offshore market on Thursday, as the world’s major currencies continued to decline after the Federal Reserve’s aggressive hikes.
The yuan has been falling for months despite interventions by China’s central bank.
The offshore yuan — traded overseas — fell to a record low of 7.2674 early Wednesday morning, before rebounding somewhat later in the day, according to Refinitiv, which has data since 2010.
On Thursday, it fell to 7.189 per dollar.
The drop comes despite the People’s Bank of China warning traders on Wednesday not to bet on the currency’s continued depreciation.
The onshore yuan, which trades in the tightly controlled domestic market, rebounded slightly on Thursday after falling to its weakest level against the dollar since the 2008 global financial crisis.
It rose 0.06% to 7.195 per dollar.
Meanwhile, the PBOC urged traders not to “keep betting”.
“The foreign exchange market is big business. Maintaining stability is the first priority,” the PBOC said in a statement posted on its website on Wednesday.
“The People’s Bank of China has accumulated rich experience in dealing with external shocks [no mercado de yuans] and can effectively manage market expectations.”
The Chinese yuan, along with other major global currencies, has weakened rapidly against the dollar in recent months.
The dollar rose to a new two-decade high on Wednesday against a basket of major counterparts, buoyed by tightening Fed policy.
So far this year, the yuan has fallen more than 13% against the dollar, on track for its worst year since 1994, when China devalued the yuan by 33% very quickly as part of market reforms.
A rapid depreciation of the currency could cause new headaches for Beijing, as it could intensify capital flight.
It could also complicate policymakers’ efforts to boost the economy by lowering interest rates.
China has loosened its monetary policy this year, bucking a global tightening trend, to shore up its economy hit by Covid-19 lockdowns and a deepening housing crisis.
“We view today’s statement as an illustration of the PBOC’s additional concerns about the currency’s rapid depreciation,” analysts at Goldman Sachs said in a research note on Wednesday.
However, they also pointed out that the BPC may not defend a certain level of the yuan’s exchange rate as the depreciation was driven by the broad strengthening of the US dollar.
But overall, capital outflow risks are manageable, as China’s capital controls have tightened since 2016, they said.
“China still holds a large amount of foreign exchange reserves and liquid assets abroad of banks, accumulated from strong inflow pressures from mid-2020 to 2021, which can also serve as a buffer for outflows,” they added.
Source: CNN Brasil
Joe Jameson, a technology journalist with over 2 years of experience, writes for top online news websites. Specializing in the field of technology, Joe provides insights into the latest advancements in the industry. Currently, he contributes to covering the world stock market.
