The Chinese yuan has been at its weakest against the dollar in more than two years. But it could be poised to fall further: Two key factors holding it together so far in 2022 look set to reverse.
The domestically traded Chinese yuan closed at 7.16 against the dollar on Tuesday. The last time that happened was in May 2020, and it has only happened a handful of times since 2009. Like most emerging market currencies, the yuan has been affected. affected this year by a combination of Federal Reserve hawks and concerns about slowing global growth. Even so, the yuan’s decline in recent months has been remarkable. It is down 12% against the dollar by 2022. JP MorganThe EM Currency Index is down just 8%, according to Refinitiv data. On Monday, China’s central bank raised the risk reserve that institutions must hold when selling currency forward contracts, making it more expensive. bet with yuan.