The Chinese currency volatility does not mean the yuan will be hit by the depreciation trend.
By Sputnik News
Although the Chinese yuan has been falling against the US dollar since the beginning of this week, concerns over the currency fluctuation are grossly exaggerated according to China’s experts
As the yuan continued its slide against the US dollar nearly reaching the alarming two-percent flotation ceiling, the question raises whether the Chinese currency will be hit by the longstanding devaluation trend.
However, China’s economic experts dismiss the speculations as groundless, explaining that the yuan’s recent volatility was caused by the European Central Bank (EBC) quantitative easing and interest rate cuts in Australia, Denmark and Canada, aimed at prevention of recession risks. According to the International Monetary Funds’ estimates, in 2015 developed countries will face deflation accompanied by slowdown in consumption growth. While a weaker currency may bolster the country’s economic development and boost its exports, Beijing is not interested in the sharp decline in the yuan, citing concerns over possible capital outflow.
Analysts point out that while the yuan was falling against the dollar, it concurrently surged up against such currencies as the British pound, euro and Japanese yen. The trend indicates that while the yuan is generally preserving its positions the US dollar is growing fast. Experts foresee that the ECB monetary easing will lead to further devaluation of euro and Japanese yen, adding that the yuan will obviously “grasp the chance” and continue its rise against them.
The Chinese currency has been consistently growing against the dollar since July 2005, bolstered by China’s major foreign exchange reform. After the temporary slump the yuan will regain its leading positions over the next year due to the country’s trade surplus.
Courtesy of Sputnik, © 2015 Sputnik
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