China’s renminbi is going through its worst weekly decline since before the epidemic, as the country’s deteriorating economic outlook and yields on US debt undermine the pull of Chinese securities.
The renminbi is trading at about 6.47 Rmb against the dollar on Friday, reflecting a decline of about 1.5% this week and marking its biggest fall since August 2019.
The fall of the Chinese currency marked the end of about half a year of stability and comes after the People’s Bank of China on Wednesday set the daily midpoint of the Hernambian dollar trading strip lower than expected in the markets.
Analysts have become increasingly bearish in Bremenby, but markets have not responded significantly until this week, when PBoC lowered its trading strip Yield advantage is offered By Chinese bonds disappeared as a result of rising US interest rates.
A weaker currency will help strengthen Chinese exports and Strengthen economic growth Severely disrupted by Covid-19 locks in cities including Shanghai.
“Clearly markets are beginning to price change in China’s policy,” said Mansour Mohi-Odin, chief economist at the Bank of Singapore. According to him, a weaker exchange rate is one of the options available to Beijing, as it seeks to maintain at the same time Tough zero-cobide policyCover the excessive leverage in the financial system and ensure annual economic growth of about 5.5 percent.
“Authorities seem to understand that these goals are difficult to achieve with their current definitions,” Mohi-Odin said. “If you want to reach that GDP target, one way to do that might be a weaker currency.”
The rising yields offered by the debt of the dollar also weigh on the renminbi. Throughout the epidemic, global investors have used Chinese bonds as a crucial source of fixed-income yields, as central banks elsewhere have pursued loose monetary policies to reduce lending costs.
But with the US Federal Reserve embarking on a A series of interest rate increasesYields on dollar-denominated bonds have recently soared above those on Chinese debt for the first time in 12 years. The disappearing yield advantage spurred foreign investors to throw a record Rmb 193 billion At the value of denominated Brenminbi bonds over the past two months.
“The renminbi now appears to be responding to the sharp narrowing of the yield gap between China and the US,” Hardman, a currency analyst at MUFG, told Lee, adding that recent losses may also reflect the “deterioration forecast for China’s economy.”
Overseas sale of Chinese shares Added to exits and dragged the stocks listed in Shanghai and Shenzhen, with the CSI 300 down nearly 20% this year.
On Thursday evening, China’s securities regulator called on local financial institutions, including banks and insurance companies, to increase support in the stock market, stating that the country’s long-term economic trajectory has not changed and that its capital market still offers “important strategic opportunities”.
Renminbi set for worst weekly drop since before the pandemic Source link Renminbi set for worst weekly drop since before the pandemic