China has taken a bold move to defend its currency by setting a record fixing. Each day, the yuan is allowed to trade within a 2% band relative to the daily fixing. On Friday, the People’s Bank of China established the fixing at 7.2006 yuan per dollar, surpassing the average estimate of 7.305 yuan from Reuters. This significant deviation from the estimate is the largest observed since the Reuters poll began in 2018, according to ING analysts.
Yuan Fluctuations
In recent days, the onshore yuan, which pertains to the currency market within mainland China, fell to a 16-year low. The exchange rate reached 7.2981 yuan per dollar on Wednesday. However, on Friday, the onshore yuan displayed slight improvement, as one dollar was valued at 7.2895 yuan.
Meanwhile, the offshore yuan, which encompasses the Chinese currency market outside of mainland China (such as in Hong Kong), continued its descent. The dollar rose by 0.1%, resulting in an exchange rate of 7.3106 yuan.
Concerns for China’s Economy
The Chinese economy is facing mounting concerns, particularly within the property sector. Evergrande recently filed for bankruptcy protection in the U.S., adding to these worries.