The yuan's plunge against the rival dollar underscores fears that China's floundering economy will weigh on global growth

China's yuan is plunging against the dollar amid worries about a slowdown in the world's second-largest economy.

AP

• China's yuan fell to a seven-month low against the dollar Monday.
• Its plunge underscores fears that the country's stagnating economy could drag down global growth.
• Mega-cap US companies like Nvidia and Tesla are also majorly exposed to China.

The Chinese yuan is plummeting against its main rival the US dollar, fueling worries that a slowdown in the world's second-largest economy will drag on global growth.

The renminbi fell as much as 0.6% Monday to just under 7.22 yuan per dollar, trading at a seven-month low versus the greenback.

The yuan's plunge against its US counterpart comes even though the Federal Reserve paused its interest-rate hiking campaign last week, which would typically be expected to weigh on the latter currency by denting its appeal to foreign investors seeking higher yields.

The renminbi's fall has coincided with increased worries about the health of China's economy after Beijing ended its hardline zero-COVID restrictions late last year, with industrial production slowing and import and export levels tumbling in 2023.

That's reignited fears about a wider slowdown in global growth, due to China's role as a major player in international trade and massive source of demand for goods and services.

Some analysts also worry that the slump could temper US stocks' breakneck rally, with surging mega-cap names like Nvidia and Tesla among the companies that are most-exposed to China, according to data from Bank of America.

The People's Bank of China – which slashed key interest rates earlier this month in a bid to revive growth – responded to the renminbi's fall by fixing the tightly-managed onshore yuan at a rate above market expectations on both Monday and Tuesday. 

The central bank pegs the currency pegged against the greenback within a narrow range, rather than allowing for it to trade via a floating exchange rate.

The onshore yuan rose around 0.3% Tuesday, to trade at just over 7.21 yuan per dollar.

Read more: Why China's faltering economy could soon become a top-of-mind concern for the US stock market

Read the original article on Business Insider

from Business Insider https://ift.tt/duX9M8A