CNY Weakens to Lowest Level in Three Months
(19 May 2023 – China) The Chinese Yuan (CNY) is depreciating at the fastest pace in three months and the central bank is surprisingly not intervening for now.
The offshore yuan extended its decline to as low as 7.075, recording its biggest weekly loss in three months after the People’s Bank of China (PBoC) set the currency’s fix weaker than seven per dollar for the first time since Q4 2022.
China's April industrial output and retail sales growth fell short of official forecasts, inferring the Chinese economy lost momentum at the outset of Q2 2023 amid growing pressure on PBoC policymakers to throw greater support behind a weak COVID recovery.
On the other side of the Pacific, why is the greenback so strong again? Analysts suggest several variables are influencing ongoing US Dollar strength continuing to defy forecasts for a weaker USD including debt ceiling negotiations, deposit runs and the global economic outlook pushing safe haven flows towards the dollar’s safe-haven status.
"The recent USD strength is largely driven by increased safe-haven demand in view of 'unknown unknowns. How severe are vulnerabilities in US regional banks and what might be the fallout of an escalation in the US debt ceiling conflict?" commented Commerzbank Currency Strategist, Esther Reichelt.
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