It is reported China has weakened
the yuan's reference rate to beyond 6.9 to the dollar for the first time ever
in more than eight years on Thursday.
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| image for internet |
On either side of the
daily fix, China only allows the yuan to rise or fall two percent, which is one
of the ways CCP maintains control over the currency.
The yuan weakened for 12
consecutive sessions up to & including Monday, and Thursday’s level was the
lowest one since the summer of 2008.
"There are no
fundamental reasons for CNY to do anything other than weaken," Michael
Every, head of Asia-Pacific financial markets research at Rabobank, told AFP,
referring to the onshore yuan quote.
"Growth is artificially
supported by unsustainable state spending and borrowing; there are still major
capital outflows; the USD is firming; rates are about to be raised in the US;
and China could be negatively impacted by tariffs as soon as 20 January."
US President-elect Donald
Trump promised to declare China during his campaign a currency manipulator on
his first office day, and threatened to slap 45 percent punitive tariffs on
Chinese imports to protect US jobs.
According to the Foreign
Exchange Trade System, the onshore yuan was quoted at 6.9194 in late morning
trading on Thursday, down 0.39 percent from Wednesday’s close of 6.8928.
In August of 2015, Beijing
suddenly devalued the yuan, which caused investors to dump the unit in volumes
not seen since 1994 and sparking an outflow of capital from China.
As the yuan is devaluing,
investment in mainland China seems unpromising at present. So, can credit purchasing be the next trend?
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