The Chinese yuan depreciated sharply against the U.S. dollar in the past two weeks. After a few months of trading in a narrow range between 6.3 and 6.4, the yuan depreciated notably against the U.S. dollar since April 19. The recent quick depreciation came as the U.S. dollar continued to strengthen, with the U.S. Dollar Index (DXY) breaking 103 on April 29, and the Japanese yen breaching 130 against the dollar.
After significant appreciation against the CFETS basket in the past year, the yuan has been relatively stable against the U.S. dollar until recently, appreciating only 2.5% between the beginning of 2021 and April 18, 2022. Yuan CEFTS basket appreciated over 12% during the same period, however, as the yuan appreciated against many trading partner currencies along with the U.S. dollar. This has come after a 4% appreciation in 2020. China’s nominal effective exchange rate and real effective exchange rate appreciated by 9.3%, and 4% respectively since the beginning of 2021, according to the Bank for International Settlements.
