Across The Border | Why US Fed’s latest stance on interest rate is good news for China
A slower pace of US interest rate hikes bodes well for the sluggish Chinese economy but analysts are still warning of tough times ahead.
The US Federal Reserve this week kept interest rates unchanged, with Fed chairwoman Janet Yellen announcing new projections that indicate the number of interest rate hikes would be cut from four to two this year.
Shen Jianguang, chief economist of Mizuho Securities Asia, said the Fed’s dovish stance would help bolster the Chinese economy.
“I think it’s certainly good news, in a way the pressure on the dollar to strengthen further is limited,” said Shen. “There will be no sharp pressure to further depreciate the renminbi, which was one major risk for the Chinese economy at the beginning of the year.”
READ MORE: Yuan rises sharply to 10-week high on Fed rate pause but Hong Kong still warns of rise risks
Offshore yuan hit a four-month high of 6.4434 to the dollar on Friday after rising 0.17 per cent from Thursday when it saw the biggest single-day jump in a month. Onshore yuan reached a three-month high of 6.4595 after rallying 0.16 per cent from Thursday following the Fed statement. Both have wiped off all the losses against the dollar this year.