Business

The Chinese Yuan has fallen sharply

Investors globally rushed to downgrade their forecasts for the yuan due to pessimism following China’s prolonged lockdown in many major cities to stem the spread of the wave of the Omicron variant virus. , amid expectations that the US will sharply increase interest rates in early May.

Before opening the market for the last trading session of April, on April 29, the People’s Bank of China (PBOC) set the reference rate for the yuan at the lowest level in 1.5 years. , was 6.6177 CNY, down 549 pips or 0.83% from the previous session’s 6.5628.

According to analysts and traders, the PBOC’s reference rate last week was mostly in line with market expectations, and any major differences between their forecast and the PBOC’s reference rate were mostly in line with market expectations. Fixed rates are closely watched by investors for clues about possible changes in foreign exchange policy.

On the spot market on April 29, the local yuan (CNY) in the morning weakened to 6.6520, the lowest level since November 5, 2020, then reversed to recover at the end of the day. session, ending the session at 6,399 CNY. Generally in April, CNY decreased by 4.39%. This devaluation is larger than the PBOC’s 2015 devaluation, which caused panic in global markets, and also larger than the devaluation in 2018 following war-related tensions. US-China trade initiated by the administration of President Donald Trump.

On the overseas market, the renminbi (CNH) was traded at 6.61 CNH/USD. Overall, in April, the CNH fell 3.75%, the biggest monthly drop since August 2019, as tensions between the world’s two largest economies increased.

  The Chinese yuan depreciated sharply - Photo 1.

Exchange rate CNY/USD.

The yuan experienced a record month of devaluation as the Chinese economy absorbed the impact of strict blockades, along with the US Federal Reserve’s (Fed) interest rate hikes, pushing investors all over the world. strong demand for Chinese stocks and bonds.

The strong fluctuations of the yuan exchange rate in the last session of April, namely a deep drop at the beginning of the session and then a rise at the end of the session, took place after China made a commitment to step up measures to support the exchange rate. supporting domestic economic stability, urging ministries, sectors and authorities at all levels to make more efforts to achieve the set economic growth target in 2022. Chinese authorities also announced increased market support. Real estate is in trouble, using all forms and tools of money.

This statement immediately helped the Chinese stock market gain strongly in the session on April 29, with the CSI 300 index closing up 2.43%. However, the spillover effect on the money market is not much.

“The most important message (from the Chinese government) is a change in policy priorities,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

The yuan depreciated due to a number of reasons. That is, the country’s economy is facing challenges from the development of the COVID-19 epidemic. The International Monetary Fund (IMF) recently lowered China’s 2022 growth forecast from 4.8% to 4.4%, much lower than the target of about 5.5% set by Beijing. Next, foreign investors accelerated selling of Chinese stocks and bonds, when the Fed raised interest rates, creating greater attraction for investments in US government bonds.

“Over the past few weeks,[China’s]top priority seems to be to prevent outbreaks of the Omicron variant virus. Now, the goal is to strike a balance between disease outbreaks and economic growth. “, said Mr. Zhiwei.

Official messages from the government have brought some relief to financial markets, after many investors cast doubt on China’s achievement of its growth target of around 5.5 per cent in this year or not, when the wave of COVID-19 blockades affects operations in all areas.

While the country’s central bank has yet to appear annoyed by the yuan’s recent slide, despite reducing the amount of foreign exchange banks must reserve earlier this week, some Investors fear that the government may soon intervene at any time.

Some traders said they received an increasing number of inquiries from corporate clients about the liquidation of their USD holdings on Friday (April 29).

“We acknowledge that a sharp decline in the CFETS (yuan index) is unlikely if the trade balance falls sharply or the services deficit widens,” Citi analysts said. , “But with the USD appreciation on a large scale, the CNH/USD exchange rate may push back to the 6.80-6.85 CNH zone.”

The CFETS index – which compares the yuan against a basket of major trading partner currencies – currently stands at 103.24, up 0.76% year-to-date. That compares with a 3.5% decline in the yuan against the US dollar so far, with most of the decline occurring in the past two weeks.

China’s capital Beijing on Friday (April 29) closed more gyms, malls, cinemas and common areas, with authorities stepping up tracing to prevent In order to prevent the outbreak of COVID, in the city of Shanghai continues the blockade that has lasted for more than a month.

Reference: Refinitiv

https://cafef.vn/dong-nhan-dan-te-trung-quoc-giam-gia-manh-20220502004624554.chn


Cashier

You are reading the article The Chinese Yuan has fallen sharply
at Blogtuan.info – Source: cafebiz.vn – Read the original article here

Back to top button