On September 15, the onshore exchange rate of China’s fiat against the US dollar recently breached the 7:1 mark, touching a 2022 low of 7.0188 yuan per dollar. In the year With a devaluation in 2022, the fall of the yuan is led by the strengthening of the US dollar.
The depreciation of the yuan
After trading at 7.0188 on September 15, 2022, the Chinese currency breached seven RMB per dollar against the US dollar, the first time in more than two years that the two currencies have weakened. This limit is exceeded. However, on the same day, the onshore yuan exchange rate did not breach the 7:1 limit.
According to a report in the Economic Times, the depreciation of the yuan comes against the backdrop of a strengthening dollar against the greenback. The currency’s decline came amid growing concerns that China’s economy may be slowing.
However, according to the report, China’s central bank’s attempt to help the economy by cutting interest rates in August led to a 3 percent depreciation of the yuan.
Ken Cheng, Managing Director of Asia FX Strategist at Mizuho Bank, commented on the dilemma facing the People’s Bank of China:
The PBOC has indicated its stance to prevent the RMB exchange rate from breaching above. [the] 7 is held in the short term and depreciation is contrary to such an objective.
As quoted in another report, Cheng said he now believes the PBOC is not interested in stopping the currency from breaching 7 yuan per dollar, but will try to “slow down and ease the pace of yuan depreciation.”
The rising dollar
The Economic Daily reports that the yuan is not the only currency struggling against the strong dollar. According to the report, Japanese authorities are also citing caution as the dollar exchange rate moves from 115:1 on January 2, 2022 to 143:1 on September 20, 2022.
Like the yen, the European Union’s single currency – the euro – began the year trading at €0.88 per dollar but will reach parity with the greenback on August 21, 2022. With the exception of a few currencies such as the Zambian kwacha and the Russian ruble, many other currencies have been struggling against the dollar.
Some economists believe that the US Federal Reserve’s attempt to bring down inflation by raising interest rates may be one of the reasons why the dollar has gained against other currencies.
What do you think about this story? Let us know what you think in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
DisclaimerThis article is for informational purposes only. It is not an offer or solicitation to buy or sell, or a recommendation or endorsement of any products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the Company nor the Author shall be liable, directly or indirectly, for any damages or losses arising out of the use of or reliance on any content, goods or services referred to in this paragraph.