China's Yuan Soars to 3.5-Year High Despite Interest Rate Cut

Ahead of the opening of the 2022 Beijing Winter Olympics, workers are setting up sculptures of the Olympic mascots Xuelonglong (left) and Bingdwenwen (right) in downtown Beijing on the 17th.
[Image source=Yonhap News]

[Asia Economy Reporter Jeong Dong-hoon] The phenomenon of the Chinese yuan's ultra-strong trend continues.

According to the foreign exchange market on the 18th, the yuan-to-dollar exchange rate in the Chinese foreign exchange market fell to 6.3368 yuan during the session, marking the lowest level since May 2018.

China has been lowering interest rates since December last year. On the previous day, China also cut the Medium-term Lending Facility (MLF) loan rate and the reverse repurchase agreement (reverse repo) rate by 0.1 percentage points, signaling an additional cut to the Loan Prime Rate (LPR), which is effectively the benchmark interest rate, on the 20th. Although this could be a reason for the yuan's depreciation, China has seen an upward trend in exports since the end of last year, sustaining the yuan's strength.

Last year, China's exports surged by 29.9% year-on-year to $3.364 trillion (approximately 3,996 trillion won), and it recorded a trade surplus of $676.4 billion (approximately 804 trillion won), which was the largest ever.