China’s yuan slides to 14-year low after US rate hikes

Sep 27, 2022, 1:17 PM | Updated: Sep 28, 2022, 3:55 am
Workers man a booth promoting the digital version of the Chinese yuan in Beijing, Friday, Sept. 2, ...

Workers man a booth promoting the digital version of the Chinese yuan in Beijing, Friday, Sept. 2, 2022. China's yuan fell to a 14-year low against the dollar Wednesday, Sept. 28, 2022, despite central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns. (AP Photo/Ng Han Guan)

(AP Photo/Ng Han Guan)

              Vendors exchange Chinese yuan notes at a store on Sunday, July 17, 2022, in Beijing. China's yuan fell to a 14-year low against the dollar Wednesday, Sept. 28, 2022, despite central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns. (AP Photo/Ng Han Guan)
            
              Workers man a booth promoting the digital version of the Chinese yuan in Beijing, Friday, Sept. 2, 2022. China's yuan fell to a 14-year low against the dollar Wednesday, Sept. 28, 2022, despite central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns. (AP Photo/Ng Han Guan)

BEIJING (AP) — China’s yuan fell to a 14-year low against the dollar Wednesday despite central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from this year’s March high.

On Wednesday, a deputy central bank governor, Liu Guoqiang, held a video meeting with Chinese bankers and told them to “maintain the basic stability of the exchange rate,” according to a central bank statement. It said Liu warned the bankers against betting the yuan would rise or fall.

“Maintaining stability is the top priority,” the statement said.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

murders...
Associated Press

Appeals court upholds most Eyman campaign finance violations

A Washington state Court of Appeals on Tuesday upheld most of the campaign finance violations that longtime anti-tax initiative promoter Tim Eyman was found liable for last year.
8 hours ago
A Washington State Department of Agriculture worker displays an Asian giant hornet taken from a nes...
Associated Press

No northern giant hornets found in 2022 in Washington state

Citizen trapping of northern giant hornets in northwest Washington ended Nov. 30 without any confirmed sightings of the hornets this year, state officials said Tuesday.
8 hours ago
This illustration provided by researchers depicts Kap Kobenhavn, Greenland, two million years ago, ...
Associated Press

Oldest DNA reveals life in Greenland 2 million years ago

NEW YORK (AP) — Scientists discovered the oldest known DNA and used it to reveal what life was like 2 million years ago in the northern tip of Greenland. Today, it’s a barren Arctic desert, but back then it was a lush landscape of trees and vegetation with an array of animals, even the now […]
1 day ago
President Joe Biden speaks about his economic agenda after touring the building site for a new comp...
Associated Press

US to boost natural gas exports to UK in energy partnership

WASHINGTON (AP) — The United States will increase exports of liquefied natural gas to Britain under a new agreement calling for the two countries to work together to boost energy security and drive down prices following Russia’s invasion of Ukraine. President Joe Biden and British Prime Minister Rishi Sunak announced the agreement Wednesday as part […]
1 day ago
Law enforcement at Hudson Road and Earl Street in St. Paul, Minn., after St. Paul police shot a per...
Associated Press

Community seeks bodycam video in St. Paul police shooting

ST. PAUL, Minn. (AP) — Community members are calling for the quick release of body camera video after a Minnesota officer shot and killed a man, who police say had a gun. Family members have identified the man as 24-year-old Howard Johnson. He was shot by a St. Paul police officer on Monday, police said. […]
1 day ago
FILE - Boys play soccer among trash that litters the sand of Yarakh Beach in Dakar, Senegal, Nov. 8...
Associated Press

Africa forum hails ‘circular economy’ solutions for climate

MOMBASA, Kenya (AP) — Reducing waste while boosting recycling and reuse, known as the ‘circular economy,’ will be vital for halting the loss of nature by meeting growing demand with fewer resources and will make communities more resilient to climate change by encouraging more sustainable practices on the African continent, organizers of the World Circular […]
1 day ago

Sponsored Articles

Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.
SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
China’s yuan slides to 14-year low after US rate hikes