USD/CNY exchange rate has continued to fluctuate due to various factors.
In the past month, the rate has not moved significantly mainly due to China's economy expanding by only 3% equivalent to 121 trillion yuan (17.4 trillion dollar). This is a decrease from the previous rate of 3.5% and is considered the lowest growth rate in 32 years.
China is trying to overlook the widening economic gap with the United States and has attributed the expansion of the gap last year to factors such as inflation and exchange rates. At the same time, it has expressed confidence in achieving its growth target in 2023 and its long-term development goals. However, there are still some trade tensions with the United States.
Vice Chairman of the National Development and Reform Commission (NDRC) Zheng Xinshen said on Monday that "the average American knows best what life is like under high inflation like this." The yuan exchange rate has also been affected by the increase in US interest rates causing a decrease in the value of Chinese products that are priced in dollars.
However, China has hardly experienced any significant increase in inflation, with the Consumer Price Index (CPI) at only 1%, it is lower than expected. China has kept its interest rate policy stable for several months and the long-term loan prime rate (LPR) for high-end customers remains at 3.65% for one year and 4.30% for five years to avoid any impact on the recovering economy from opening up.
Bank of China has announced a reduction in the reserve requirement ratio (RRR) for commercial banks, which is the first reduction this year. This is aimed at increasing liquidity in the banking system and reducing the cost of capital for businesses, resulting in lower lending costs for banks and an expansion of economic recovery.
Meanwhile, the United States faced problems with a heavy increase in interest rates last year that leading to the collapse of three banks and causing deposit runs. There were also concerns about whether the debt ceiling could be expanded. Many had already predicted a potential increase in interest rates by 0.5%. If interest rates were to increase, it would further strengthen the value of the US dollar.
Technical analysis data (5H)