The yuan fell below a symbolic range against the dollar on Friday, signaling a slowing depreciation of the Chinese currency, reflecting the decline of the world’s second-largest economy.
The renminbi, another name for the Chinese currency, quoted in mainland China (CNY), fell below 7 yuan against the dollar, for the first time since July 2020.
Another quote, called offshore (CNH), exists for the yuan, with a greater margin of growth, especially in special administrative regions such as Hong Kong.
The long decline of the yuan continues, even as the Chinese authorities are trying to contain it.
On Wednesday, the Chinese central bank (PBOC) set a new record gap between the daily set reference rate specifically for the yuan and market expectations, indicating a proactive approach by Chinese authorities.
Once the reference rate is set by the central bank, the exchange rate can move within a margin of 2% up or down.
On Thursday, the PBOC withdrew nearly 200 billion yuan (about $28 billion) of liquidity from the market, a move that is theoretically likely to back its currency.
For Mark Chandler of Bannockburn Global Forex, China wants to “moderate” the pace of its currency’s depreciation, but doesn’t want to stop it because it gives it an added advantage to its exports, among other things.
The Chinese economy has been in recession for several months, a movement exacerbated by the effects of persistent sanitary confinement, which deprives the yuan of support.
In August, to limit this slowdown, authorities slashed credit rates and released funds to protect the real estate development sector, as shown by the sinking of giant Evergrande last year.
But for Craig Botham of Pantheon Macroeconomics, this favorable policy weighed on the yuan, prompting Chinese officials to take measures to stem its decline.
China is also suffering from huge withdrawals from foreign investors, setbacks in the real estate development sector, a major consumer of debt, but also affected by the depreciation of the yuan. And by selling their financial products denominated in yuan, they contribute to the depreciation of the renminbi.
Elsewhere in the forex market, the pound fell to $1.1351 on Friday, the first time in more than 37 years.
The British currency followed the publication of sharply falling retail sales in the United Kingdom in August, which “underlined the brutality of the economic downturn”, commented Susanna Streeter of Hargreaves Lansdowne.
“This reinforces expectations that members of the Bank of England will not be as courageous in raising rates as their Fed counterparts,” the US central bank, the analyst, wrote in a note.
In another sign of the Fed’s current dominance over the South African rand, along with other central banks, the Canadian and Australian dollars all fell to their lowest level since 2020 against the US dollar on Friday.
In addition to the Fed, this decline is due, according to Mark Chandler, to a certain aversion to risk, with these currencies being perceived as more volatile.
Cours de vendredi Cours de jeudi 18h05 GMT 21h00 GMT EUR/USD 0,9996 1,0001 EUR/JPY 142,93 143,54 EUR/CHF 0,9648 0,9617 EUR/GBP 0,8776 0,8721 USD/JPY 142,99 143,52 USD/CHF 0,9653 0,9616 GBP/USD 1,1389 1,1467