Experts advised to wait with the purchase of Chinese currency

Yuan will lose value

The Chinese yuan fell to a 28-month low against the US dollar on Monday. Technical attempts by the People’s Bank of China to slow down the fall were unsuccessful. Meanwhile, this event is important for Russia, since the most promising foreign currency for it under the sanctions is rapidly depreciating.

For the first time since July 2020, the national currency of China fell to 7 yuan per dollar. Chinese investment bank CITIC Securities said in a statement that this is due to external factors. Meanwhile, in the Russian financial market, interest in the yuan as the main alternative to the “toxic” dollar and euro is not weakening at all. According to the Central Bank, in August its share in the volume of exchange trading in currency reached 26%, while in April it was 6%. The main buyers are banks, but the activity of individuals is also growing, who bought 39 billion rubles worth of yuan last month. But there are also risks: firstly, Russia still does not have a full-fledged infrastructure for working with the yuan, and secondly, the Chinese currency is very heavily regulated. So the yuan is not yet suitable for the role of a full-fledged investment asset.

“The yuan on the international currency market is “famous” for its non-market rate formation,” notes Andrey Loboda, director of external relations at BitRiver. – This year, the dollar has risen in price against it by 12%, and this is not the limit. Against the backdrop of the success of the Celestial Empire with the development and launch of the digital yuan, as well as the expansion of yuan financial instruments for Russian investors, it is worth keeping up to 20% of the currency in yuan in your basket. But not more. Making a major bet on the Chinese currency is premature in terms of profitability.”

“From the point of view of the exchange rate, it is not profitable to buy anything but the dollar,” says Artem Deev, head of the analytical department at AMarkets. According to him, it’s not about how much what currency is worth in relation to the US. The problem is this: against the backdrop of a global recession, all currencies tend to weaken, even the British pound is losing ground, under the influence of the negative in the economy of the United Kingdom. Our Ministry of Finance does not have to choose, because it is necessary to protect ruble funds, and dollars and euros are not available for transactions. Moreover, Deev recalls that China is becoming Russia’s main trading partner, and funds are needed to pay for imports – many European goods are now being replaced by Chinese ones. And this is not a question of economic benefit, but the task of reducing risks in the face of Western sanctions and restrictions.

“As long as the Fed continues to raise interest rates, which may reach 4.5% by the end of the year, the dollar will strengthen against all world currencies,” says Nikolay Vavilov, a specialist in the strategic research department at Total Research. – Today, among all the world’s economies, the United States looks the most stable. Europe is poised to plunge headlong into recession, China is slowing growth, imposing permanent lockdowns due to a “zero COVID” policy, and its housing market, which is almost a third of GDP, is on the verge of collapse. In such conditions, investors choose more reliable assets. For these reasons, the dollar will strengthen and the yuan will fall in value. And if someone in Russia plans to buy yuan, it is better to wait.”