Yen Intervention Puts Additional Pressure on China's Yuan
The US and Japan's intervention to strengthen the yen has put additional pressure on China's yuan to appreciate, according to Bloomberg Economics. The boost to the yen in late July spilled over to other Asian currencies, including the Chinese yuan.
This upward trend in the yuan is at odds with a widening yield disadvantage against the dollar and weakness across much of the economy outside a thriving tech sector, Bloomberg economists David Qu and Chang Shu said in a report published Wednesday. The intervention could potentially drain support for growth as the yuan gains despite falling bond yields.
The report highlights that the yuan's appreciation is not aligned with economic fundamentals, which may have implications for China's economy. The widening yield disadvantage against the dollar makes it more challenging for the yuan to maintain its current value.