Will China Stop The Yuan Value From Decreasing Further?

[Djamel Brahimi]

[Jon Steeler]

China came out over the weekend and warned traders that they face huge losses if they continue to short the Yuan after the recent drop in value took it to near the critical 7 per dollar value against the US dollar.

These statements were made by the head of China’s banking and insurance regulator, this being the highest level financial official to publicly comment on the issue. These comments have come after the bearish sentiment regarding the Yuan has increased heavily due to the ongoing trade tensions between China and the US. So will the Chinese government actively intervene to stop the Yuan from devaluing further? Well the answer to this is it is more then likely as they have history. 

In early 2017 when officials grew upset about the Yuan’s weakness they acted by choking the cash supply in Hong Kong, which helped to drive a rally in the Yuan’s price. 

So I would say the chances of the government acting to increase the value of the Chinese currency are quite high at this point especially after a warning from a high level official.