BRICS member China is yet again dumping US dollars in the global currency markets to protect the Chinese Yuan. The Chinese state-run banks offloaded US dollars in the spot foreign exchange markets for three consecutive days on Monday, Tuesday, and Wednesday this week. Chinese banks resorted to dumping US dollars after rating agency Moody’s cut China’s outlook to negative. The ratings affect the Chinese Yuan’s prospects and could make the currency weaker in the global markets.
BRICS: China Resorts To Dump US Dollar’s To Protect Chinese Yuan
After Moody’s ratings, the Chinese state-run banks stepped up their game by aggressively selling US dollars in the forex markets. Chinese banks were selling the US dollars and immediately buying the Chinese Yuan for three days straight. The move is aimed at tilting the Chinese Yuan into a favorable position against the US dollar.
While China aggressively sold US dollars on Monday and Tuesday, Wednesday’s sell-off was rather mild, reported Reuters. However, sources close to the development said that Chinese banks cannot resort to these tactics for the long term. The analysts said the impact on the Chinese Yuan from Moody’s decision will not be sustainable for long.
China and the extended BRICS alliance are doing everything possible to protect their local currencies from the US dollar. BRICS is advancing to uproot the US dollar as the global reserve status and replace it with their local currency. Read here to know how many sectors in the US will be affected if BRICS stops using the dollar.
The Chinese Yuan is at a 16-year low against the US dollar after falling to 7.15 this month in December. The dollar stood firm on solid US jobs data making the Yuan dip to a 10-month low this year. BRICS member China’s local currency, the Yuan, dipped 6.14% against the US dollar in the last 30 days alone. The Yuan is still down 3% year-to-date against the rising US dollar.