The article discusses how the Chinese yuan is weakening against the dollar due to two significant factors: the worsening property crisis in China and a stronger dollar. The onshore yuan has experienced a decline this week, reaching a trading level more than 1.9% weaker than the daily reference rate set by the People’s Bank of China. This rate determines the allowed range for the currency’s trading, with a limit of 2% on either side. The yuan’s value came perilously close to this limit on Monday, marking its closest proximity since last October.
The first factor contributing to the weakening of the yuan is the ongoing property crisis in China. The country is facing a significant downturn in its property market, which is having a negative impact on the overall economy. As a result, investors are becoming increasingly concerned, leading to a decline in the value of the yuan.
Additionally, the strength of the US dollar is also putting pressure on the Chinese currency. A stronger dollar means that it takes more yuan to purchase one dollar, thus reducing the value of the Chinese currency. This is particularly relevant as the dollar continues to gain strength in global markets. The combination of these two factors is causing the yuan to weaken and approach the limit of its fixed trading band against the dollar.
In conclusion, the yuan’s weakening can be attributed to the worsening property crisis in China and the stronger US dollar. The onshore yuan has declined to a level that is more than 1.9% weaker than the daily reference rate set by the People’s Bank of China, coming close to the 2% limit of its allowed trading range. The property crisis in China has led to concerns among investors, while the strength of the dollar has put further pressure on the yuan’s value. These dynamics highlight the challenges faced by the embattled Chinese currency.