China's Yuan Hits Weakest Level Against Dollar in 14 Years
New York, NY, September 28, 2022-"China’s central bank warned market participants against speculating on the yuan, after the currency slid to its weakest level against the dollar in more than 14 years and hit a record low in international trading,” according to the Wall Street Journal.
“On Wednesday, the offshore yuan depreciated to more than 7.2 to the dollar for the first time since a separate system for trading the currency outside mainland China was launched more than a decade ago.
“The yuan also broke 7.2 against the dollar in China’s more tightly controlled onshore market, going beyond that mark for the first time since February 2008 and capping a 12% fall in the currency against the greenback in the year to date.
“At 5.30 p.m. local time on Wednesday, the People’s Bank of China released a statement that said it had held a meeting the previous day to analyze the recent market movements.
“‘The foreign exchange market is of great importance, and maintaining its stability is the top priority,’ it stated. It said investors shouldn’t be betting on the unilateral appreciation or depreciation of the yuan, and called on banks to curb such activity. It also said some companies have been engaging in currency speculation or flouting regulations, without giving details.
“The yuan ‘has withstood the test of many rounds of external shocks,’ it said. ‘You will lose if you keep betting.’
“Both the offshore and onshore yuan pared some of their losses following the central bank’s comments. The offshore yuan recently traded at 7.2419 per dollar, after hitting a low of 7.2675, according to FactSet.
“The steep decline of the yuan against the dollar makes it increasingly difficult for China’s central bank to cut interest rates to boost the country’s sagging economy, according to analysts. A widening gap in interest rates between China and the U.S. has been a key driver of the Chinese currency’s weakness.
“The People’s Bank of China has taken multiple steps to support the yuan this year, raising foreign-currency reserve requirements and making it costlier for traders and institutions to bet against the yuan using forward contracts.”