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China Sets Biggest One-day Yuan Rate Increase Since 2005

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  • China Sets Biggest One-day Yuan Rate Increase Since 2005

China on Friday (Jan 6) raised the exchange rate for the yuan against the US dollar by 0.92 per cent from the previous day, the biggest one-day increase in more than 11 years.

The People’s Bank of China (PBOC), which has been battling to shore up the sagging yuan, fixed it at 6.8668 to the greenback, according to the China Foreign Exchange Trade System, which operates the national foreign exchange market.

That marked the strongest daily increase since July 2005, and comes as the yuan had flirted lately with the 7.0 to the dollar mark, a threshold not crossed in more than eight years.

China only allows the tightly controlled yuan to rise or fall two per cent on either side of the daily fix, to prevent volatility and maintain control over the currency.

This came a day after the yuan scored its biggest-ever two-day gain against the dollar as Beijing cracked down to bets against its currency ahead of US president-elect Donald Trump’s inauguration on Jan 20.

China’s currency has been under pressure from uncertainty over the health of the world’s second largest economy, massive capital outflows and the sharp rise in the US dollar following Trump’s election victory and anticipation of US interest rate hikes.

The PBOC has plenty of reasons to give the yuan some short-term support. Trump has pledged to label the country a currency manipulator on his first day in office, while the exchange rate came close to breaking through the psychologically-important level of 7 per dollar earlier this week. Policy makers also want to avoid a flood of capital outflows as citizens’ annual foreign-exchange quotas reset for the new year.

China said last week it would almost double the number of foreign currencies it uses to determine the official value of the yuan, thereby diluting the role of the dollar as authorities seek to arrest the yuan’s fall and project an image of stability in the unit.

On Thursday, the PBOC clamped down on yuan borrowing in Hong Kong by instructing its banks to withhold funds from other banks, a move which sent overnight interbank interest rates soaring to 38 per cent from 17 per cent, the highest in a year, the Wall Street Journal reported.

The yuan in offshore trading in Hong Kong jumped 1.2 per cent on Thursday for a two-day gain of 2.5 per cent. The onshore yuan gained 0.7 per cent to 6.8830 per dollar in Shanghai.

The record two-day rally offshore revived memories of an epic squeeze last January for bearish traders. The abrupt market reversal almost exactly a year ago marked the beginning of a nearly 5 per cent rally that lasted two months.

“Another extraordinary day in China,” said Gareth Berry, a foreign-exchange and rates strategist at Macquarie Bank in Singapore. “It looks like a classic case of a consensus trade blowing up at the start of a new year.”

The turbulence represents the latest twist in a battle between China bears – who say slowing economic growth makes a devaluation inevitable – and policy makers fearing a sudden drop will destabilize the financial system. Pessimists have mostly been on the right side of the trade since a one-time exchange rate adjustment in August 2015, but sudden bouts of strength have proven painful for short sellers who need to periodically roll over their bets.

“It’s painful to sit on short yuan positions now, given the soaring funding costs,” said Sim Moh Siong, a currency strategist at Bank of Singapore.

Bloomberg News reported this week that policy makers were encouraging state-owned enterprises to sell foreign currency. National Australia Bank says bears are unlikely to see a major reprieve any time soon as authorities keep tight control of the yuan before this month’s inauguration of US President-elect Donald Trump.

Short squeezes like the one in Hong Kong’s offshore market this week come at a cost. While surging interbank rates help deter bearish speculators, they also undermine China’s push to make the yuan an international reserve currency, said Michael Every, head of financial markets research at Rabobank Group in Hong Kong.

“What’s the point of being a reserve currency and having fought so hard to become a reserve currency, and then not letting anybody get hold of that currency,” he said. “China basically wants to have its cake and eat it on all fronts.”

Analyst estimates compiled by Bloomberg suggest China will eventually let the yuan continue its descent. The exchange rate will fall to 7.15 per dollar by year-end before sliding to 7.3 the following year, according to the median projections.

In the short term, though, the currency is unlikely to be a one-way wager, said Angus To, deputy head of research at ICBC International Research Ltd. in Hong Kong. “After this round of liquidity squeeze, speculators will at least scale down short yuan bets for the next two months,” To said. “We expect the offshore yuan to stabilize at around 6.8 yuan per dollar after the market run.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Black Market Dollar to Naira Exchange Rate Today 13th June 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of June 13th, 2024 stood at 1 USD to ₦1,490.

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NAIRA - Investors King

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of June 13th, 2024 stood at 1 USD to ₦1,490.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,480 and sold it at ₦1,470 on Wednesday, June 12th, 2024.

This indicates a slight decline in the Naira exchange rate value when compared to today’s rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in the black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

  • Buying Rate: ₦1,490
  • Selling Rate: ₦1,480

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

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Naira

Black Market Dollar to Naira Exchange Rate Today 12th June 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of June 12th, 2024 stood at 1 USD to ₦1,480.

Published

on

Naira to Dollar Exchange- Investors King Rate - Investors King

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of June 12th, 2024 stood at 1 USD to ₦1,480.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,500 and sold it at ₦1,490 on Thursday, June 6th, 2024.

This indicates an improvement in the Naira exchange rate value when compared to today’s rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in the black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

  • Buying Rate: ₦1,480
  • Selling Rate: ₦1,470

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

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Forex

Cedi Falls to Record Low Due to Increased Dollar Demand from Importers

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inflation

The Ghanaian cedi has plummeted to a record low of 14.9335 per dollar as the increase in demand for US dollars by companies importing fuel, pharmaceuticals, and other fast-moving consumer goods put pressure on the currency.

This depreciation, observed by the close of trading in Accra, marks the cedi’s lowest level since at least 1994 when Bloomberg began tracking the data.

Since the start of the year, the cedi has declined by 20% against the US dollar, ranking it as the fourth-worst performing currency among approximately 150 tracked globally by Bloomberg, following the Egyptian pound, Nigerian naira, and Lebanese pound.

“Dollar demand from oil importers, the pharmaceuticals industry, and FMCG companies remains strong,” noted Samantha Singh-Jami, Africa Strategist at Rand Merchant Bank. “Although authorities have significantly increased foreign exchange reserves in recent months, there are still constraints on foreign exchange liquidity in the market.”

Ghana’s gross international reserves rose to $6.6 billion in April, the highest in over 19 months, as per data compiled by Bloomberg.

The central bank has been strategically managing these reserves to ensure sufficient market supply, including directly addressing some companies’ foreign exchange needs to alleviate the pressure on commercial banks.

This increase in reserves follows Ghana’s decision to halt servicing most of its external debt since December 2022.

The move was part of a debt restructuring effort to qualify for an International Monetary Fund (IMF) program. Disbursements from the $3 billion IMF package and inflows from other multilateral and bilateral sources have bolstered the reserves.

However, the cedi’s decline is also attributed to a significant drop in cocoa export revenue, which has diminished foreign exchange supply. Revenue from cocoa shipments fell by 49% to $599 million from January through April.

The country’s cocoa output for the 2023-24 season is projected to be between 422,500 and 425,000 tons, which is only half of the initial estimate.

“The weakening of the cedi seems to reflect foreign exchange flow mismatches,” said Samir Gadio, head of Africa Strategy at Standard Chartered Bank. “Foreign exchange demand recovered this year, though it has remained broadly constant in recent months, and continues to exceed supply.”

The combination of high demand for dollars by importers and reduced foreign exchange inflows has created a challenging environment for the cedi.

Despite efforts by the central bank to manage the situation, the currency continues to struggle under the weight of these economic pressures.

Economic Outlook

The Ghanaian government and central bank face a tough task in stabilizing the cedi amidst these challenges.

Ensuring adequate foreign exchange liquidity while addressing the structural issues in the economy, such as reliance on imports and fluctuating export revenues, will be crucial in reversing the cedi’s downward trend.

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