Chinese Yuan at 6.7825 per Dollar... Lowest Since May Last Year

Expectations for China's Economic Recovery Drive Yuan Strength to Continue for Now
Chinese Forex Authorities Unlikely to Intervene to Stimulate Domestic Demand

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The People's Bank of China, the central bank of China, announced on the 16th that the midpoint exchange rate, which serves as the reference rate, was set at 6.7825 yuan per dollar, down 0.58% from the previous day. This is the lowest level in 16 months since May last year.

On the previous day, the onshore yuan-dollar exchange rate closed at 6.7775 yuan, also the lowest since May last year. A lower yuan-dollar exchange rate means that the yuan has relatively strengthened in value.

Since May, when China clearly began to recover from the impact of the novel coronavirus (COVID-19), the yuan has shown a distinct strengthening trend.

In fact, the onshore yuan-dollar exchange rate rose to 7.1775 yuan on May 27.

[Image source=Yonhap News]

The yuan’s strength is expected to continue for the time being.

Indicators showing that the Chinese economy has entered a recovery phase have been released, increasing expectations for China’s economy.

The greater the expectations for economic growth, the more foreign capital is bound to flow into China.

Xinhua News Agency cited data from the National Development and Reform Commission of China on this day, reporting that the Chinese government plans to optimize the investment environment by easing regulations and preparing various projects to encourage foreign companies to increase investment in China.

Additionally, the expectation that the Chinese government will not actively intervene in the foreign exchange market to control import prices is another factor that could sustain the yuan’s strength for the time being.

The higher the yuan’s value rises, the more price competitiveness China can have for imported products. From the perspective of the Chinese government, which is focusing on revitalizing the domestic market, it is not difficult to control import prices.

This content was produced with the assistance of AI translation services.