‘End of the dollar’ threatened? Yuan reaches lowest level in 2024, after change in bet by China’s Central Bank

O yuan (or renminbias it is called chinese currency) is weakening against the dollar this Friday (22) after a recent stability movement, and touched 2024 lows.

Depreciation occurred after the People’s Bank of China (PBoC) set a lower daily reference rate for the yuan onshore (local).

This move was interpreted as a sign that the central bank is willing to allow the currency to trade lower.

It is worth remembering that a strong local currency tends to limit the country’s exports, which may not be so positive for the China at the time.

According to data from Trading View, the yuan has fallen almost 5% against the dollar in the last 12 months. Since the beginning of the year, the accumulated drop is 1.64%.

Why move the yuan now?

Analysts also believe the yuan is suffering from shifting bets elsewhere following a big week of central bank moves.

In just the last few days, the Bank of Japan (BoJ) ended its long experiment with negative rates, and the Federal Reserve (Fed) signaled three rate cuts this year.

The Fed’s commitment to rate cuts is expected to weaken the dollar in the long term, but for now it largely depends on timing.

The slowdown in China’s economy is another factor weighing on the local currency. The PBoC cut some rates last year, widening the interest differential between China and the US.

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Investments in China

A China attracted 215.1 billion yuan ($29.88 billion) in foreign direct investment (FDI) in the first two months of 2024, a value 19.9% ​​lower than in the same period last year.

The data was published by the country’s Ministry of Commerce this Friday (22). In a statement, the ministry attributed the drop to record FDI levels from a year earlier.

Despite the decline, the two-month result was the third best in the last ten years, highlighted the ministry.

In 2023, the volume of FDI in the world’s second largest economy fell 8% compared to the previous year, when measured in yuan.

Last year, the ministry stopped publishing figures in dollars.

*With information from Estadão Conteúdo