New blow for the Chinese currency. The yuan has marked its lowest levels this week against the dollar for 16 years, a collapse that analysts cited by the local press blamed on doubts about China’s economic recovery and the cooling of economic activity. The ‘onshore’ exchange rate -negotiated in local markets- reached 7.3286 yuan per dollar, a level not seen since 2007, this Thursday, the day on which the Asian country’s Customs Administration reported a year-on-year drop in the export volume in August of 3.2%.
For its part, the ‘offshore’ rate -operated in international markets such as Hong Kong- reached 7.3419 yuan, marking levels of weakness very similar to those of the ‘onshore’ exchange rate. An official who requested anonymity was quoted as saying by the local publication Jiemian today that he attributed the weakness of the yuan to factors such as “doubts in the market about economic recovery” China, the “cooling of non-manufacturing business activity” or “volatility” of the market stock market
For its part, the National Economic Research Center of Peking University pointed out in a report published last week that “high temperatures and extreme climates have recently occurred, that “domestic demand remains insufficient” and that consumption growth “may continue to slow down” in the world’s second largest economy. “Downward pressure persists,” the Center warned.
However, the official quoted by Jiemian said that “supply and demand in China’s foreign exchange market are basically stable and the resilience of foreign trade is showing signs of improvement.” Analysts consulted by the header also indicated that the Banco Popular (Central Bank) exchange rate management tools “continue to be abundant”, so that “the margin for continued depreciation of the yuan is limited.” So far this year, the yuan has fallen more than 5% against the dollar due to the slowdown in the Chinese economic recovery and the real estate crisis in the Asian giant.
