The Chinese yuan fell again

The Chinese yuan is already at its weakest level against the dollar for more than two years. But it could be on the verge of falling even further: two major factors that are keeping it so far in 2022 look likely to reverse.

The onshore-traded Chinese yuan closed at 7.16 to the dollar on Tuesday. The last time this happened was in May 2020, and it has only happened a handful of times since 2009. Like most emerging market currencies, the yuan has been battered this year by the combination of a hawkish Federal Reserve and concerns about slowing global growth. Nevertheless, the fall of the yuan in recent months is striking. It is down 12% against the dollar in 2022. JP MorganThe emerging market currency index was down just 8%, according to data from Refinitiv. On Monday, China’s central bank increased the risk buffer that institutions must hold when selling currency forwards, making it more expensive to bet against the yuan.