China scrambles to show it can sustain falling yuan as currency falls to 14-year low

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The Chinese yuan has plunged against the dollar this year as the country’s economic recovery falters.REUTERS/Jon Woo

  • The yuan plunged against the dollar in 2023 as China’s economic recovery floundered.

  • Beijing is fighting to show it can support the currency as it falls to a 14-year low.

  • China’s central bank pegged the renminbi higher on Thursday after a state-backed newspaper said it had the tools to protect it from panic selling.

Beijing is fighting to show it can support the Chinese yuan as it tumbles to a 14-year low.

China’s central bank and a state-backed newspaper both sought to support the currency this week amid signs that the country’s post-COVID economic recovery has begun to unravel.

The renminbi had fallen to a seven-month low of less than 7.27 yuan to the dollar on Wednesday, meaning it is now within 1% of the low it hit in the first quarter of 2008.

The plunge came after an economic gauge assessing activity in the country’s service industry fell more than expected, another signal to investors that growth has begun to flounder despite Beijing lifting its severe lockdowns. zero-COVID towards the end of 2022.

The state-backed Financial News reacted to the fall of the yuan with a comment that the People’s Bank of China had the necessary monetary tools to protect the currency from “panic” selling.

The publication blamed the yuan’s depreciation over the past two months on near-term economic weakness, but said the currency could still stabilize or even strengthen on either a more optimistic outlook or supportive monetary policy.

The central bank then announced on Thursday that it would peg the renminbi higher than expected, at just under 7.21 yuan to the dollar.

The yuan is pegged to the dollar at a rate set by Beijing, but allowed to strengthen or weaken within a 2% range.

Learn more: Why China’s faltering economy could soon become a major concern for the US stock market

Read the original article on Business Insider

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