All articles tagged with #chinese yuan
The US dollar strengthened after reports that China may allow the yuan to weaken in anticipation of higher tariffs under a potential second Trump presidency. This news affected markets, causing the offshore yuan to drop by 0.5% and boosting Bloomberg's dollar index by 0.3% to a two-week high, ahead of upcoming US inflation data and a Federal Reserve meeting.
Asia-Pacific markets rose on Tuesday, following record highs in the S&P 500 and Nasdaq Composite on Wall Street. Key indices like Japan's Nikkei 225 and South Korea's Kospi saw significant gains. South Korea's inflation rate increased to 1.5% in November, below expectations. Meanwhile, the Chinese yuan weakened past 7.3 against the dollar for the first time since July. Traders are anticipating upcoming U.S. economic reports and Federal Reserve comments that could impact interest rates.
China's yuan fell to a four-month low against the dollar, prompting state-owned banks to intervene and defend the currency. Market sources revealed that state banks bought yuan for dollars, and the currency closed at 7.2275 per dollar, 281 pips softer than the previous session. The yuan's decline is attributed to growing expectations of further monetary easing to support the economy, as well as a stronger dollar and depreciation of the Japanese yen and other Asian currencies. The People's Bank of China set the midpoint rate weaker than market projections, indicating potential further easing measures. The sudden weakness in the yuan also impacted stock markets, with the Shanghai stock index down 1%.
The U.S. Federal Reserve is expected to cut interest rates, benefiting some Asian currencies like the Chinese yuan, Indian rupee, and Korean won. The yuan is expected to stabilize due to fiscal stimulus and credit growth in China, while the rupee could benefit from carry trades and a slower pace of monetary policy loosening by the Reserve Bank of India. South Korea's won is also expected to benefit from the Fed's easing cycle and improved economic prospects.
The Chinese yuan and Japanese yen are gaining strength against the previously dominant U.S. dollar, with the yuan trading at 7.116 renminbi USDCNY and the dollar trading below its 200-day moving average. This marks a comeback for the yuan, which had weakened significantly in recent months, and a resurgence for the yen.
Shares of Chinese real estate firm Country Garden Holdings plummeted to a record low, sparking concerns about the health of China's economy. The stock fell approximately 20% after the company suspended trading some of its bonds, raising fears of a potential default. This news, along with the Chinese yuan hitting its lowest level against the dollar since late 2022, highlights the real risks of a recession in China. The economic downturn in China's real estate sector and the overall economic malaise in the country are causing investors to lose faith in the Chinese currency.
Indian oil refiners are increasingly using the Chinese yuan instead of the US dollar to purchase Russian crude, as fears of potential secondary sanctions have made Indian banks wary of using greenbacks for Russian imports. This shift comes as Russian oil imports into India reached a record high in June. The adoption of the yuan provides relief for both China and Russia, as Beijing aims to promote its currency in cross-border trade agreements and Moscow seeks to circumvent Western measures.
Argentina, facing a severe shortage of US dollars, is now allowing commercial banks to open deposit accounts in the Chinese yuan. The move comes as the Argentine peso has plummeted nearly 80% against the US dollar since the start of 2020. The country has been increasingly using the yuan as an alternative currency, paying for imports from China in yuan and making a $2.7 billion payment to the International Monetary Fund in the Chinese currency. The shortage of dollars is due in part to a drought that has impacted the country's agriculture exports, leading to a decline in dollar reserves. The surge in yuan usage in Argentina has opened an opportunity for China to increase the global circulation of its currency.
China may not be fully supportive of making the yuan the reserve currency of choice, as Beijing is unwilling to open its capital accounts or to run a deficit. China is likely to pursue its sphere of currency influence among countries it trades with actively, such as Asia, breaking up US dollar dominance in parts of the world instead. The US dollar's position and clout as a reserve currency comes at a cost, a current account deficit for America, which China cannot afford to run.
China is unlikely to push for the yuan to become the dominant global reserve currency due to its unwillingness to liberalize its currency and allow money to move freely in and out of its economy, its inability to run a persistent deficit like the US, and the geopolitical risks it faces. Instead, Beijing is likely to focus on breaking up US dollar dominance in parts of the world and pursuing its sphere of currency influence among countries it trades with actively.
The Russian ruble has fallen to its lowest level in a year amid speculation that Shell may repatriate over $1 billion of recent earnings. This comes amid a growing liquidity crunch and foreign flight on the back of Western sanctions. Meanwhile, the Chinese yuan has surpassed the US dollar as the most traded currency in Russia.
The Russian ruble has fallen to its lowest level since April 2022 amid speculation that Shell may repatriate $1.2 billion of the currency. This comes amid a growing liquidity crunch and foreign flight on the back of Western sanctions. Meanwhile, the Chinese yuan has recently surpassed the US dollar as the most traded currency in Russia.
CNN's Fareed Zakaria discusses the potential impact on the US dollar after Russian President Vladimir Putin announced that he favors using the Chinese yuan for financial settlements with other countries during his meeting with Chinese President Xi Jinping, which could have significant implications for the global financial system.