Jan 15, 2024: On Monday, the Yuan experienced a drop to a one-month low following an unexpected move by China’s central bank, the People’s Bank of China (PBOC), which decided to maintain its medium-term policy rate. Contrary to market expectations for a rate cut to support China’s post-pandemic economic recovery, the PBOC’s decision led the onshore yuan to a one-month low of 7.1813 against the dollar. It later recovered some losses, trading down 0.08% at 7.1749. The offshore yuan also saw a decline, nearing Friday’s one-month low at 7.1906 per dollar. Meanwhile, the U.S. dollar remained relatively steady on Martin Luther King (MLK) Jr. Day, a public holiday, with the dollar index showing a marginal increase of 0.07% to 102.58.
Analysts noted that while the PBOC kept rates unchanged this time, rate cuts are still a possibility, especially with the recent shift in the U.S. Federal Reserve’s policy, providing more room for accommodative monetary measures by the PBoC. Key economic indicators, including China’s fourth-quarter GDP, December industrial production, retail sales, and unemployment rate, are expected to offer additional insights into the country’s economic outlook when released on Wednesday.
