Chinese Yuan Continues to Drop Against US Dollar
China's currency hit a 17-month low against the U.S. dollar today, as fears grow about the economic repercussions from continued Covid lockdowns in some major Chinese cities. "There are concerns about the Covid situation in Beijing evolving into what happened in Shanghai with some prolonged lockdowns that bites the economy," Kevin Li, portfolio manager at GF Asset Management (Hong Kong) Ltd, told Bloomberg.
In response to the yuan tumble, China is cutting the amount of foreign currencies that banks are required to hold in hopes of strengthening their own currency, according to Markets Insider. Starting May 15, China's financial institutions must hold 8% of their foreign exchange in reserve, down from the current 9%, the People's Bank of China said Monday.
"Certainly, there's a lot of concern coming out that these lockdowns are going to impact global trade and the combination of that with a lot of tightening outside China, like in the U.S., will perhaps exacerbate the slowdown that's expected," Mazen Issa, a senior FX strategist at TD Securities in New York told MarketWatch. "A weaker currency from here could be a signal that perhaps the global growth outlook may be worsening and has the potential to further destabilize the markets."