China steps in to defend the yuan, as US tensions and Hong Kong uncertainty send currency tumbling

Name: Coronavirus: What’s going to happen to China’s economy?
Uploaded: 2020-05-29T14:00:17.000Z
Duration: 5 min 59 s
Description: Coronavirus: What’s going to happen to China’s economy?

The onshore central parity – the midpoint of the yuan’s permitted daily trading range – was set at 7.1316 against the US dollar on Friday morning

Facing downward pressures from Hong Kong’s loss of autonomy in the eyes of the US and geopolitical turmoil, China has signalled it will defend the currency

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The downward pressure on the yuan has grown as hostility flared over Beijing’s decision to impose a new security law on Hong Kong. Photo: AP

Cissy Zhou

Published: 10:00pm, 29 May 2020Updated: 11:27pm, 29 May 2020

The Chinese central bank moved again on Friday to support the yuan after it fell this week to its lowest level against the US dollar in eight months, amid rising tensions with the US and growing uncertainty over Hong Kong’s future.

The People’s Bank of China (PBOC) set the yuan’s daily central parity rate stronger than its previous closing price in the onshore spot market for the ninth consecutive trading day, in a sign the central bank is pushing back against rising volatility.

The downward pressure on the yuan has grown as hostility flared over Beijing’s decision to impose a new security law on Hong Kong. This prompted Washington to deem that Hong Kong is no longer autonomous from the mainland, threatening the city’s future as a financial and commercial hub.

Hong Kong is the biggest “offshore” market for the yuan, accounting for 70 per cent of yuan payments outside China, according to the latest data compiled by payments network Swift.

05:59

Coronavirus: What’s going to happen to China’s economy?

On Friday morning, the onshore Chinese yuan traded at 7.150 per US dollar, while its offshore counterpart traded at 7.168 to the dollar. On Wednesday, the offshore yuan dropped to 7.1965 to the US dollar, its weakest level since last September.

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