China’s currency, the yuan, has recently hit its highest level against the US dollar in 16 months.
This surge in value is attributed to recent economic stimulus measures announced by Beijing, aiming to invigorate the nation’s decelerating economy.
China exercises strict control over its currency, particularly the yuan, contrasting with currencies like the Japanese yen and the US dollar. The trading range for the yuan is capped at 2% above or below the daily midpoint rate. However, the offshore yuan, which can be traded in Hong Kong, London, Singapore, and New York, experiences less stringent controls.
The People’s Bank of China has implemented measures including the reduction of cash reserve requirements for banks. Additionally, a 0.2 percentage point cut in the 7-day repo rate was announced. These actions have helped the yuan soar to its highest level since May 2023, with a peak at 6.9946 per US dollar before stabilising slightly.
Experts are evaluating whether the yuan will sustain its upward trend. Edmund Goh of Abrdn suggests that China’s current economic environment may apply pressure on the yuan. Conversely, Zerlina Zeng of CreditSights anticipates that the yuan could trade below 7.0 in the coming months, driven by China’s pro-growth policies.
The Chinese yuan’s recent rise against the US dollar underscores the significant impact of Beijing’s economic policies.
As the world monitors China’s monetary strategies, the future trajectory of the yuan remains a critical focus for international markets.
