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Peter Davis

An writer at FOMOdrive

  • Sep 14, 2023
  • 2 min read

The yuan against the US dollar fell to a 16-year low

The dollar rose against the yuan to a 16-year high.

Data concerning Chinese foreign trade was the cause of the fall.

The dollar is gaining strength against all currencies.

Morgan Stanley has a pessimistic outlook on emerging market currencies.

On Thursday, the yuan exchange rate against the US dollar dropped to its lowest point since 2007, surpassing the lows seen during China's nationwide lockdown in 2020.

The Financial Times notes that the yuan is feeling the strain due to the weak economic figures from China and the crisis in the real estate sector.

On Thursday, statistics regarding foreign trade were released, indicating a decrease in both Chinese exports and imports, as well as a decrease in the nation's trade surplus.

In August, exports from China decreased by 8.8% compared to the same period last year, making it the fourth consecutive month of decline. Additionally, imports to China also dropped by 7.3%, continuing the negative trend that has been present since the start of the year - there has not been any growth in imports on an annualized basis since January.

China's trade surplus decreased to $68.36 billion in September 2022 from $78.65 billion in August 2022 and $80.6 billion in July 2022.

Economists attribute the decrease in both exports and imports to a decrease in demand for Chinese goods worldwide, as well as a slowdown in the Chinese economy and consumer demand. This has led to a decrease in the demand for raw materials and goods from abroad.

Standard Chartered has attributed the current wave of depreciation of the yuan to the strengthening of the dollar in the global market, as well as the widening gap between the monetary policies of China and the United States.

Commerzbank believes that the yuan will remain under pressure until economic growth reaches its lowest point.

Jefferies believes that the Chinese Central Bank will likely attempt to stop any major devaluation. The National Bank of China is expected to take steps to back the yuan, but its aim is to reduce the depreciation of the national currency, not to maintain any particular levels, according to Commerzbank.

Since the start of the year, the yuan has depreciated by almost 6% against the US dollar due to the increasing strength of the dollar index. Compared to other major currencies, the decline was not as drastic.

Morgan Stanley has adopted a bearish outlook on emerging market currencies due to worries about the potential impact of China's economic slowdown on the global economy. The Malaysian ringgit and the Singapore dollar are particularly vulnerable to this risk.

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