Chinese Yuan Hovers Around Lowest Level Since May 2017

The  Chinese yuan is hovering around its lowest level since May 2017 on  Wednesday as  the  equities market plunged, US-China trade tensions escalated, and  investors continued to  sell off their yuan holdings this week. Is this a  sign that the  worst may be behind the  currency? These are factors that may already be priced in  the  yuan, capping its rapid descent.

The  Hang Seng China Enterprises Index slipped 2%, the  MSCI’s emerging-market benchmark shed 1.3%, Shanghai’s benchmark stock gauge, fell 2%, and  the  small-cap ChiNext plunged 2%. China had been able to  withstand the  international stock market volatility, especially in  the  wake of  Turkey’s economic collapse. There have been widespread fears that the  nation’s financial crisis might seep into other pockets of  the  global economy and  financial markets.
Traders are still paying attention to  the  US-China trade spat that does not appear to  be settling down anytime soon. The  US government continues to  slap tariffs on  Chinese exports, while Beijing has promised to  retaliate to  every import levy.
And  this is having an  incredible impact on  the  national economy. This week, new data found that retail sales slowed in  July, fixed-asset investment rose at  the  slowest pace on  record, and  factory output failed to  beat the  market forecast of  6.3%. This comes as  the  Chinese economy expanded 6.7% in  the  second quarter, down from 6.8% in  the  first quarter.
As  a  result of  the  tepid economic data, the  federal government has vowed to  introduce stimulus efforts, such as  easing credit, spending more on  infrastructure, and  preventing financial troubles from popping up across the  economy. The  People’s Bank of  China (PBOC), meanwhile, will introduce tools to  stabilize the  currency, but it confirmed that it will not use the  yuan to  gain leverage in  the  trade spat with the  US.
The  Chinese yuan is expected to  be under pressure for  the  next few months, but much of  what has been occurring – trade war, sluggish economic growth, and  Turkey’s economic demise – are gradually being priced in  by  the  market. Plus, China is attracting a  lot of  foreign attention, primarily because bonds are considered risk-free and  investors are picking up cheap stocks.
The  USD/CNY currency pair surged 0.74% to  6.9348, from an  opening of  6.8841, at  16:58 GMT on  Wednesday. The  EUR/CNY is also gaining, tacking on  0.76% to  7.8686, from an  opening of  7.8105.

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