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Chinese Yuan Hits Lowest Level Since 2008 Financial Crisis By

By on September 28, 2022 0

© Reuters.

By Ambar Warrick– The Chinese yuan fell to its weakest level since the 2008 financial crisis on Wednesday amid a flurry of hawkish comments from Federal Reserve officials and growing worries about China’s economy minted currency.

The fell 0.7% to 7.2244, its weakest level since late 2007. The currency has plunged more than 13% this year, reeling from a severe slowdown in the Chinese economy and a hawkish Fed.

The yuan plunged to a record low on Wednesday.

The currency has also come under increased pressure due to a growing chasm in local and international interest rates. The People’s Bank of China is one of the few central banks to cut interest rates this year, as most of its peers raised rates to stave off rising inflation.

China, on the other hand, faces falling inflation levels amid slowing economic growth. The country’s economy barely grew in the second quarter and is expected to face contraction in the three months to September.

China also rolled out a series of stimulus measures this year, increasing local liquidity conditions and further depressing the yuan. The government is now trying to maintain a precarious balance between boosting economic growth and keeping the yuan weak.

Overnight, St. Louis Fed Chairman James Bullard warned that the United States faces a “serious inflation problem”, likely hinting at a tightening of monetary policy as the country is struggling with inflation at its highest level in 40 years.

Minneapolis Fed Chairman Neel Kashkari was less subtle in his foreshadowing, saying there was “a lot of tightening in the pipeline.” US interest rates have risen 300 points this year and should end the year around 4.4%, their highest level in 16 years.

Kashkari and Bullard’s comments come just days after the and warned he would risk economic weakness in the fight against inflation. The hawkish signal sent ripples through global financial markets, with the yuan and its Asian peers facing prolonged selling.

The , on the other hand, has reached new heights in 20 years.