Chinese Yuan Shows Weakness

 Chinese Yuan Shows Weakness

Chinese Yuan Shows Weakness In Start Of 2024

Chinese Yuan didn't start the year 2024 on a positive note against the US Dollar. This market behaviour is due to increased chances of monetary easing from the PBOC in the coming months.

The Public Bank of China will likely introduce more rate cuts in the next few months. The Central Bank of China has already made a few rate cuts in earlier months. So, if the PBOC further lowers the interest rate while it stays the same in the USA, it would lead to more weakness in Yuan.

China'S Manufacturing Activity Down In December

According to official data, December marked the 3rd month in which manufacturing activity in China declined. This sector's weakness was much more than the forecasts made by market experts.

An economist added that its policy pivot is a significant tailwind for the Chinese Yuan. Another source suggested that the Chinese government will likely advance with more easing measures and fiscal support.

In addition, it was also revealed that many commercial banks in China have also lowered their respective deposit rates. This is a sign that the PBOC will also reduce the lending rates to help the economy.

The PBOC established a new range for the Chinese Yuan with a band of around 2% earlier. This means the fix for Yuan has been changed from 7.0827 to about 7.0770.

If we look at the FX spot rates, the opening price of Yuan was around 7.107 against the greenback. By midday, the exchange rate jumped to about 7.1262, a sign of USD appreciation.

The year 2023 was closed by the Yuan with a 2.8% change against the greenback. That makes it the 2nd consecutive drop yearly and highlights that China needs to take additional measures.

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