Fed Hike Aftermath Series: China’s state owned banks sell dollars amid yuan decline after Fed hike

After US Federal Reserve hike interest rates for the first time in 2016 by 25 basis points and for the second time since the Great Recession of 2008/09, Chinese state-owned banks were seen selling dollars in the market this morning. However, that hasn’t halted Yuan’s decline to the lowest level since June 2008. The move might have arrested bigger decline. According to a trader at a Chinese bank at Shanghai major state-owned banks were selling dollar in the market. Over the past two years, mostly with the aim of stabilizing the yuan’s decline, Chinese state-owned banks have regularly sold dollars.

According to Bloomberg quotation, the Chinese yuan is currently trading at 6.935 per dollar. Over the past 12 months, the yuan has declined about 7.4 percent and this year it has declined 6.9 percent. It has been the worst year for the yuan since the exchange rate was liberalized in 2005. However, this record weakness in the yuan has gone largely under the radar as many emerging market currencies and some of the developed-market currencies have performed much worse.