Categories: Economic News

China’s currency hits three-month low as economic woes mount

  • China’s yuan fell to a three-month low on Friday, above the key 6.8 level.
  • Investors have flocked to the dollar, while China’s economy is under great pressure.
  • The country is facing a real estate crisis and a strict zero COVID policy.

China’s currency fell to its lowest level in three months on Friday, reflecting the strength of the US dollar and concerns about rising risks to the Asian powerhouse’s economy.

The onshore yuan, which trades within limits set by China’s central bank, fell to around 6.815 yuan per dollar, according to Bloomberg data. The Chinese currency hasn’t traded this low since May, falling 0.29% to 6.086 at last check.

The drop came after the People’s Bank of China set the range in which the onshore yuan is allowed to trade at 6.8065, the lowest level since September 2020. A drop above the 6.815 level would bring the yuan at its lowest level in three years.

Meanwhile, the most traded offshore yuan fell to 6.829 per dollar, also its lowest level since May. The latter fell 0.25% to 6.821.

Like many currencies around the world, the yuan is feeling pressure from a rising US dollar. The dollar index rose 0.15% on Friday to 107.64.

The greenback has rallied sharply this year as the Federal Reserve has raised interest rates, making U.S. investments relatively more attractive, and as investors worried about the global economy have sought so-called safe haven assets.

However, China’s economic woes are also weighing on the yuan, also known as the renminbi. The country is struggling with a real estate crisis, a strict zero-covid policy and a damaging heat wave.

This week, the central bank unexpectedly cut interest rates after a string of weak economic data. The move worried investors who took it as a sign that the economy is doing worse than they had thought.

“The yuan has fallen about 6% against the US dollar since March,” said David Kelly, chief global strategist at JPMorgan Funds. “However, this largely reflects the overall appreciation of the dollar.”

However, Kelly said the zero-covid policy and the housing crisis are likely to further weigh on growth. “All these issues are having an impact on economic activity and the Chinese authorities are playing down their real GDP growth target of 5.5% by 2022, which now looks unattainable,” he said.


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