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China’s offshore yuan is headed for its worst week in more than six years as it struggles against mounting signs of an economic slowdown, as well as rising rates in the U.S.
According to Tullett Prebon data, the offshore yuan, which circulates outside mainland China, was down around 2.3% this week as of Friday morning — on pace for its worst week since the week that ended on Aug. 14, 2015, when it fell 3.5%. The offshore yuan
USDCNH,
traded around 6.53 per U.S. dollar on the day.
The yuan is taking a hit from both rising Treasury yields as U.S. policy makers prepare to aggressively boost interest rates next month, as well as signs of an economic slowdown in the world’s second-largest economy. Those signs include falling consumer spending as a result of China’s zero-tolerance approach to COVID-19.
The International Monetary Fund earlier this week cut its forecast for China growth this year to 4.4%, down from 4.8% previously, and warned that the potential for a deeper slowdown could weigh on the global outlook.
“China is in a bind,” said FHN Financial’s Chief Economist Chris Low, in a note. “A 20% drop in oil imports — despite access to fire-sale priced crude from Russia — suggests a deep economic slowdown.” Subway usage, plus home and car sales, are down, Low wrote on Friday. And this week, People’s Bank of China Governor Yi Gang appeared to downplay the possibility of any significant support from the central bank, by saying monetary policy is in a “comfortable range.”
Earlier: China’s central bank cuts reserve requirement ratio in ‘begrudging’ move
