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Chinese Yuan Close to 15-Year Low After Fed Rate Hike

Latest rate hike by the US Fed forced the PBOC set a midpoint rate of 7.2472 per dollar, 275 pips or 0.28% weaker than the previous fix, and the softest since January 2008

China's yuan jumped 0.5% on the back of strong promises of support for the economy by Beijing.
The yuan traded offshore at 7.1444 per dollar and was at 7.1454 per dollar in the onshore market. File pic from June 2022 by Reuters.


China’s yuan hovered at a near 15-year low on Thursday, after the US Federal Reserve opted to increase US interest rates higher than expected.

The Fed raised its benchmark funds rate by 75 basis points as expected, but said the fight to cool inflation needs borrowing costs to be further.

That outcome forced the People’s Bank of China (PBOC) set the midpoint rate at 7.2472 per dollar, 275 pips or 0.28% weaker than the previous fix 7.2197, and the softest since January 22, 2008.

In the spot market, the onshore yuan opened at 7.3100 per dollar, before it eased to a low of 7.3110, not far from a near 15-year low of 7.3280 hit on Tuesday.

By midday, the spot yuan was changing hands at 7.3036, 146 pips or 0.2% weaker than the previous late session close.

Traders said the currency’s weakness stemmed mainly from the firmer dollar, but signs of a domestic slowdown added pressure on the yuan.


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“We further lower our 2023 GDP growth forecast by 70 basis points, to 3.8%,” economists at Barclays said in a note.

“The downgrade is mainly attributable to our weaker outlook for the property sector and worsening external demand amid a looming global recession and rising geopolitical tensions.”

A recent Reuters poll forecast China’s growth to slow to 3.2% in 2022, far below the official target of around 5.5%, which is one of its worst performances in almost half a century.

Separately, some market participants said they would shift their attention to US jobs data due on Friday for more clues on the Fed’s tightening trajectory.

By midday, the global dollar index rose to 111.925 from the previous close of 111.345, while the offshore yuan was trading at 7.3225 per dollar.


  • Reuters with additional editing by Jim Pollard




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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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