The US dollar is rising against the Chinese yuan, and the Communist country is worried about the development. The US dollar is ending on a new high at a time when the China-led BRICS are looking to derail their growth. The dollar’s increase against local currencies lately has got authorities in China, India, and Japan worried. To counter the US dollar’s rise, China announced a new rule that its financial institutions must hold foreign currency deposits by a third only.
Also Read: U.S. & European Union React to BRICS Expansion
However, in the latest update, China’s Central Bank has ramped up the rule and is scrutinizing bulk US dollar purchases by domestic firms. China tightened its scrutiny on US dollar purchases by domestic firms as the Yuan faces depreciation in global markets.
Domestic firms that need to purchase $50 million or more will now need approval by the People’s Bank of China. “The approval process will be extended,” said a source close to the development on condition of anonymity to Reuters.
Also Read: BRICS: China’s Economy Echoing 2008 Financial Crisis of the U.S.
BRICS member China is looking to halt the US dollar’s rise against local currencies, especially the Yuan. “The recent Yuan depreciation has indeed been too severe. Many now expect the Yuan to weaken beyond 7.5 per dollar,” said the source.
China has now warned lenders of its huge US dollar purchases on behalf of corporate clients. The directive was issued this week after the Chinese Yuan declined 6% against the US dollar.
China & Other BRICS Members Look To Halt the Rising US Dollar
Apart from China, BRICS member India reportedly dumped the US dollar last week to keep the Rupee from falling. According to reports, a state-run bank was asked by the Reserve Bank of India to aggressively dump the US dollars.
A trader told Reuters on the condition of anonymity that the Indian bank sold U.S. dollars in the international markets. “The RBI seems determined to keep INR away from a record low,” against the US dollar, said the trader. Read here to know more details about how India aggressively dumped the US dollar.
Also Read: Not BRICS: Uncontrolled Debt Could Bring the US Dollar Down
The US dollar is rising at a time when the BRICS alliance is looking to dethrone its global reserve status. Read here to know how many financial sectors in the US could be affected if BRICS completely ditch the dollar.