2024-03-22 06:32:31
On Friday (March 22), the yuan fell to a four-month low against the US dollar, falling below a key threshold. . (Philippe Lopez/AFP via Getty Images)
[The Epoch Times, March 22, 2024](Comprehensive report by Epoch Times reporter Xia Yu) On Friday (March 22), the RMB exchange rate against the US dollar fell to a four-month low, falling below a key threshold.
Reuters reported that the onshore RMB exchange rate against the U.S. dollar fell below the key mark of 7.2 on Friday and hit a low of 7.24, the lowest level since November 17 last year.
At the same time, the U.S. dollar rose to 7.2236 against the onshore yuan during the session, also a new high since November 17 last year.
Market sources told Reuters that China’s state-owned banks then stepped in to buy the yuan with U.S. dollars. As of noon, the RMB exchange rate was 7.2251, down 257 basis points from the closing price at the end of the previous trading day.
The sources declined to be named because they were not authorized to discuss market transactions publicly.
The yuan has fallen more than 2% in three months and has come under pressure on growing expectations for further easing of monetary policy.
Carlos Casanova, senior economist at UBP Asia, said that after the Bank of Japan ended its negative interest rate policy, the strength of the U.S. dollar and the sharp depreciation of the Japanese yen and some Asian currencies put pressure on the yuan.
“The market seems to believe that Asian currencies should weaken further against the dollar before the Fed cuts interest rates,” he said.
Some market participants said that the strong U.S. index, the difficulty in narrowing the negative interest rate differential between China and the United States, and the U.S. election this year and other factors will continue to suppress the performance of the RMB.
Before the market opened, the People’s Bank of China (PBOC), the central bank of the Communist Party of China, set the central parity rate of the yuan against the US dollar at 7.1004, 62 basis points lower than the previous central parity rate of 7.0942, allowing the yuan to trade within a 2% range.
Bloomberg believes that the People’s Bank of China lowered the central parity rate of the RMB on Friday, the largest amount since early February. To some market participants, this is a sign that Beijing is approving further devaluation of the yuan as the economic recovery falters.
Meanwhile, the offshore yuan continued to weaken, hitting a more than four-month low of 7.2525.
Ju Wang, head of foreign exchange and interest rate strategy for Greater China at BNP Paribas, predicts that news of further easing of monetary policy by the People’s Bank of China will cause the yuan to test lows near 7.3 again.
A sudden weakening of the yuan also weighed on stocks, with the benchmark Shanghai stock index falling 1.4%.
Casanova said that if there are signs that Beijing allows the yuan to depreciate from 7.2 to 7.3, “it will definitely make the stock market rally more difficult to sustain because many people will try to diversify their dollar investments.”
Editor in charge: Ye Ziwei#
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