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The yuan came under pressure amid problems in the Chinese housing market


July, 27 2022
watermark Economic news

On Wednesday, the Chinese yuan showed a decline against the background of weak demand for loans, which led to a reduction in REPO rates. 


Today it became known that short-term REPO rates on the continental market fell below 1% for the first time since January 2021 under the pressure of excessive liquidity and restrained demand for loans. 


Analysts note that with very low real interest rates in China, it is possible that the Chinese economy falls into a liquidity trap. And to maintain its growth, additional fiscal stimulus and loosening of the regulation of the real estate market may be required. The traditional easing of monetary policy now is not expected to effectively support economic growth.


Before the market opened, the People's Bank of China set the median rate at 6.7731 yuan per US dollar against 6.7483 yuan on Tuesday.


Additional pressure on the Chinese currency is exerted by the expectation of the outcome of the US Federal Reserve meeting and the rate decision. Investors are also waiting for a telephone conversation between Chinese Leader Xi Jinping and US President Joe Biden scheduled for Thursday.


It is also worth paying attention to the statistics released today: in June, the profit growth of manufacturing companies in China resumed and amounted to 0.8% compared to June last year. In May, the indicator decreased by 6.5%.


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Foreign exchange trading carries a high risk of losing money due to leverage and may not be suitable for all investors. Before deciding to invest your money, you should carefully consider all the features associated with Forex, as well as your investment objectives, level of experience, and risk tolerance.