Chinese President Xi Jinping sits down during a visit to Renmin University of China in Beijing, capital of China, April 25, 2022.
Ju Peng/Xinhua via Getty Images
China’s yuan is on its longest losing streak since October 2018, according to the Wall Street Journal.
The currency has lost 5% against the greenback so far in 2022 amid downbeat economic data from Beijing.
Higher US bond yields and an aggressive Fed have helped pushed the dollar 11% higher so far this year.
China’s yuan has dropped 5% against the dollar so far in 2022, dropping for five consecutive months. That marks the currency’s longest losing streak since October 2018, according to the Wall Street Journal.
The Federal Reserve’s aggressive policy has pushed the dollar to 20-year highs. The greenback has climbed 11% this year amid sky-high inflation and declining gold purchases.
Goldman Sachs’ chief commodities strategist Jeff Currie said a weaker yuan means Chinese consumers — who make up roughly one-third of retail gold purchases — have less purchasing power to buy the safe-haven metal.
“As the Chinese yuan fell, gold followed it lower,” Currie told the Journal.
Similar to China’s currency, bullion has dropped for four months straight and is currently down more than 12% from March highs.
Gold is typically viewed as a safe-haven investment, like the greenback, though that hasn’t played out in 2022 because of the Fed’s hawkish policy.
As US bond yields rise with interest rates, the dollar has rallied dramatically, which then pushes down competing currencies such as the yuan — which ultimately makes gold more expensive for overseas customers and emerging-market central banks.
Meanwhile, Chinese investors have been stockpiling cash rather than pumping it back into the economy, which has also pushed the dollar higher this year.
Instead of letting yuan flows hit the real economy, the money is ending up in bank bonds and corporate debt.