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Yuanand Stocks Dropped Sharply As Widespread COVID Cases


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Yuan and Stocks Dropped Sharply As Widespread COVID Cases


Chinese stocks dropped Monday as residents in the country's capital face a potential mass lockdown amid a COVID infection spike. In Beijing, residents rushed to buy supplies as officials began mass testing for the coronavirus. 

The CSI 300, which tracks 300 large- and mid-capitalization stocks traded in Shanghai and Shenzhen, lost 4.9% to end at 3,814.91, the weakest finish since April 2020. The Hang Seng Index declined by 3.6%, and the Shanghai Composite fell by 5.1%. 


Underscoring economic concerns about China, the yuan has hit its lowest point against the dollar in 17 months, and according to the People's Bank of China, starting May 15, China's financial institutions must hold 8% of their foreign exchange in reserve, down from the current 9% level. The reduction is meant to increase the supply of dollars and other foreign currencies onshore to strengthen the yuan.



Over the last five days, the yuan has lost 3% against the dollar, and stands as the worst performer among Asian currencies, Bloomberg data shows. Last week, the yuan notched its worst weekly drop against the dollar since 2015.


With the lessons learned from Shanghai, the citizens of Beijing began to hoard daily necessities in case of citywide lockdown.


Ongoing COVID-19 disruptions have dragged on economic forecasts for China, while investors have rushed back to the dollar amid rising US bond yields and an increasingly hawkish Federal Reserve.


A spokesperson from China's foreign exchange bureau said recent fluctuations in the yuan are due to global market volatility, but the yuan remains basically stable. 


"With strengthened resilience in the foreign exchange market, China has the foundation and conditions to adapt to the [US] Fed's policy adjustment," Wang Chunying, a spokesperson of the State Administration of Foreign Exchange, said at a Friday briefing. She noted that the yuan's recent swings have been "stable and healthy."



 Source: Markets Insider


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