Friday, September 11, 2020

Strong Chinese yuan hurting Chinese recovery

Over the past six months, the dollar has depreciated relative to the Chinese yuan (the price of a dollar has fallen), falling from 7.1 yuan to only 6.85 yuan, a 3.5% decline.  It may be that Chinese citizens (who have high savings rates) are more reluctant to invest in the US (a fall in demand for dollars).

China’s currency has climbed more than 5% from this year’s low in May, the best performance in Asia. A strong yuan is an obstacle when the nation’s economy is recovering from the coronavirus pandemic and confronted with escalating tensions with the U.S. because it could undermine the attractiveness of exports.

The yuan’s gain versus its trading partners’ currencies is smaller compared with its move against the dollar. The Bloomberg CFETS RMB Index Tracker, which measures the yuan versus 24 peers, has risen just 2.4% from a record low last year. The gauge currently stands at 92.95.

No comments:

Post a Comment