Skip to content China Cuts Rates – Yuan Weakens Amid US Election Hype
The value of the offshore yuan recently fell to approximately 7.14 against the US dollar. The stronger US dollar influenced this decline as traders adjusted their expectations, predicting smaller US Federal Reserve interest rate reductions. These expectations come when investors closely watch the upcoming US presidential election for further market cues.
The USD/CNH 4-hour chart below demonstrates the price, support, and resistance levels.
China Lowers Interest Rates to Record Lows
Earlier in the week, the People’s Bank of China, the country’s central bank, decided to lower its interest rates to the lowest recorded levels.
Specifically, the one-year loan prime rate (LPR), the standard interest rate for most loans to businesses and individuals, was reduced by 0.25% to 3.1%. This rate affects many people and companies looking to borrow money.
Additionally, the five-year LPR, commonly applied to housing mortgages, also saw a reduction of 0.25%, bringing it down to 3.6%. These cuts are part of broader efforts by China’s central bank to make borrowing cheaper and encourage economic activity.
China Hints at More Bank Lending with Rate Cuts
This move followed comments from Pan Gongsheng, the Governor of the People’s Bank of China, who suggested these rate reductions last week.
It also hinted at possible further decreases in the reserve requirements for commercial banks later in the year. These reserve requirements are the amount of funds banks must hold back from lending, and lowering them would allow banks to lend more.
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