China’s yuan: will economic recovery lift currency out of the jungle after Fed effect fades?
- Yuan is one of the worst performing currencies in Asia this year, dropping below the key level of 7 against the US dollar for the fourth time since 2019
- Wang Chunying, deputy head of the State Administration of Foreign Exchange, says spillover affects of tightening US monetary policy will weaken
China still has the tools to stabilise market expectations for the yuan’s exchange rate, while external conditions will also marginally improve as the United States is expected to conclude its run of interest rate increases, the foreign exchange regulator said on Friday.
Wang Chunying, deputy head of the State Administration of Foreign Exchange (SAFE), said the spillover effects of tightening US monetary policy will weaken, offering support to the Chinese currency.
“It is possible that the [US Federal Reserve] will continue to raise interest rates, but it is also nearing the end of the rate hike,” Wang said.
She said China’s economic fundamentals, which will continue to recover and improve, are still the decisive factor for the yuan’s rate.
In the context of slowing global economic growth, China’s economy will play a stronger role in supporting the foreign exchange market
“In the context of slowing global economic growth, China’s economy will play a stronger role in supporting the foreign exchange market,” Wang added.
