China’s Yuan Plummets After Its Central Bank Cut Rates for the 2nd Time in Two Weeks

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China’s yuan dipped to a two-year low Monday, following a second interest rate cut by authorities in Beijing in two weeks. 

The yuan was changing hands at 6.86 against the dollar, as Beijing aggressively tries to revitalize its credit sector following a pandemic-related plunge that has turned markets subdued. The People’s Bank of China cut its benchmark five-year loan prime rate to 4.30% from 4.45%. The rate hikes follow a previous ten basis-point rate hike last week of China’s one-year medium-term lending facility loans. 

In an interview with CNBC, Analysts said that while the latest rate cut in China is motivating, the country still needs to loosen stringent Covid-19 regulations meant to enforce Beijing’s “Zero-Covid” policy. Chinese markets have remained sour as the country recovers from the pandemic. 

China has been slower to tackle inflation aggressively and instead has eased policy in contrast to sharp rate hikes from the US Federal Reserve and other central banks. China’s last three benchmark rate increases are its most substantial moves yet to move forward from the Covid-19 pandemic’s battering of its economy.