China’s central bank cuts yuan rate against dollar to new record low

The onshore yuan weakened by more than 500 basis points (bps) to 6.72 against the dollar during intraday trading on May 9 to hit its lowest point since November 2020, following the US Federal Reserve’s move to hike interest rates, Report informs referring to Global Times.

The official central parity rate of the yuan weakened 567 bps to 6.6899 against the dollar, according to the China Foreign Exchange Trade System.

However, analysts said that the Chinese central bank has a variety of tools to maintain the yuan’s exchange rate within a reasonable range, while China's solid economic fundamentals will support a stable yuan in the long term.

The current volatility is also correlated with China’s current economic downward pressure caused by Omicron lockdowns in cities like Shanghai, Zhengzhou and parts of Beijing.

The dollar continues to gain strength thanks to the Fed’s accelerated pace in raising interest rates to tame surging inflation, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on May 9. In April, the US dollar index rose to 103.05, the highest level since January 2017.

However, there is no basis for long-term depreciation of the yuan, Dong said, noting that China’s economic fundamentals – characterized by strong resilience and enormous potential – remain unchanged, and the yuan will stay stable in the long run.