(PatrioticPost.com)- Even though Beijing has established a relatively high reference rate for the yuan, the currency’s value continues to decline against the United States dollar and is getting closer to the psychological barrier of 7 yuan to one dollar.
According to a study conducted by Bloomberg, the People’s Bank of China moved the fix 454 pip(s) over the average estimate. This is the eleventh day in a row in which the fixings have been stronger than predicted.
Because of China’s continued COVID-19 lockdowns and the US Federal Reserve’s hawkish stance, the yuan’s value continues to decline. Both of these factors have had a negative impact on the industry and the economy. According to data provided by Bloomberg, the disparity between the onshore yuan and the currency fixing has grown to more than 600 pips, which indicates a pessimistic attitude and marks the most significant differential since May.
Another action taken on Monday with the intention of supporting the yuan’s value was the announcement by the People’s Bank of China that it would reduce the required percentage of foreign currency reserves.
As of the 15th of September, banking institutions will be required to hold 6% of their deposits in foreign currency as reserves, reducing from the existing requirement of 8%.
Meanwhile, the Chinese government reported that the country’s foreign exchange reserves fell for a second consecutive month and reached their lowest since October last year.
The sharp appreciation of the US dollar, which could see even more significant gains as markets begin to evaluate the possibilities of another rate hike in the US of 75 basis points, contributed to the reduction in the number of stockpiles held by China.
Jerome Powell, the chairman of the Federal Reserve, reaffirmed the institution’s dedication to reducing inflation and boosting interest rates in August by saying at Jackson Hole that the bank “will stick at it until we are certain the job is done.”
According to data provided by Bloomberg, China’s trade surplus, which is a vital source of foreign money, fell to $79.4 billion in August, down $21.9 billion from July. China’s economic prospects were also negatively impacted by high inflation rates worldwide.
Even with the People’s Bank of China adjusting its policies, the weaker surplus will continue to weigh down the yuan’s value.