Forex - Chinese Yuan Falls Despite PBOC’s Efforts

24 July 2018, 10: 56
© Reuters.  Chinese yuan dropped on Tuesday

The Chinese yuan dropped on Tuesday despite the PBOC’s injection of $74 billion into the country’s banking system the day before in a bid to strengthen the currency.

Separately, China’s foreign ministry spokesman Geng Shuang said the country is not looking to boost its exports through devaluing the yuan. “The yuan's exchange rate is mainly determined by market supply and demand. It floats in both ways, which means there are ups and downs,” Geng said.

His comments came after U.S. President Donald Trump’s brickbats last Friday in a tweet, slamming China and the EU on deliberately controlling their currencies.

The Chinese yuan depreciated against the U.S. dollar as the USD/CNY pair saw an increase of 0.36% to 6.8177 on Monday.

Some investors believed that yuan will go further down.

Vladimir Signorelli, a macro-investment analyst at Bretton Woods Research, said “If the dollar keeps strengthening and gold goes below $1,200 an ounce, you should not be surprised to see the yuan go to seven plus. The correlation between them is that strong.”

Meanwhile, the dollar steadied on Tuesday after the sharp decline in the previous session as Trump told CNBC last Friday that he was “not thrilled” about the Federal Reserve’s decision on raising interest rates.

On early Saturday, Treasury Secretary Steve Mnuchin tried to ease fears of a currency war at the G-20 meeting, confirming the Fed’s independence, and saying that the government would not intrude.

Mitsuo Imaizumi, chief currency strategist at Daiwa Securities, said, “The U.S. economy is in a very healthy state overall. It is unimaginable the Federal Reserve would stop raising interest rates.”

The U.S. dollar index rose 0.01% to a trading price of $94.43 at 12:01AM ET (04:01 GMT).

Elsewhere, the Japanese yen grew stronger against the dollar, with the USD/JPYedged down 0.09% to 111.24. The yen reached a two-week peak on Monday.