Chinese yuan hits highest level against dollar in 16 months due to stimulus policies, US Fed rate cut: experts

The offshore Chinese currency yuan briefly rallied past the 7.0 per dollar milestone for the first time in 16 months on Wednesday, as investors digested China's stimulus measures to stabilize growth and the recent U.S. Fed rate cut kept the dollar on the back-foot.

China's central bank governor Pan Gongsheng Tuesday said that the country will cut the reserve requirement ratio (RRR) by 0.5 percentage point in the near future, providing about 1 trillion yuan (about 142.30 billion U.S. dollars) in long-term liquidity to the financial market.

Depending on the liquidity situation in the market, the RRR may be further lowered by 0.25 to 0.5 percentage point within the year, Pan told a press conference in Beijing.

Meanwhile, the U.S. Federal Reserve announced last week that it will slash the target range for the federal funds rate by 50 basis points, marking the first rate cut since March 2020 and signaling the start of a monetary policy easing cycle.

"On the one hand, as U.S. Federal Reserve kicked off a monetary policy easing cycle, the interest rate difference between the Chinese and U.S. currencies narrowed. On the other, the resilience of China's foreign trade and its high trade surplus have helped stabilize the Chinese yuan exchange rate. The recent introduction of a host of policies to stabilize growth has also significantly boosted market confidence," said Wen Bin, chief economist at the Beijing-based China Minsheng Bank.

Recently, the supply and demand of the foreign exchange market have become more balanced. Data released by the State Administration of Foreign Exchange showed that in August, the cross-border income and expenditure volume of enterprises, individuals and other non-bank sectors has changed from a deficit previously to a surplus of 15.3 billion U.S. dollars.

"The appeal of Chinese yuan assets has increased dramatically, attracting the inflow of overseas capital, and further promoting steady performance and gradual improvement of the Chinese yuan exchange rate. We have every reason to believe that with the continued support of policies and the fundamentals of the economy, the Chinese yuan exchange rate can stay in a balanced range and perform well," said Tian Lihui, director of the Institute of Finance and Development at the Nankai University in north China's Tianjin Municipality.

Chinese yuan hits highest level against dollar in 16 months due to stimulus policies, US Fed rate cut: experts

Chinese yuan hits highest level against dollar in 16 months due to stimulus policies, US Fed rate cut: experts

The Democratic Republic of the Congo (DRC) has said it is open to a deal with the United States, under which Kinshasa would exchange its valuable rare-earth minerals for defense and security assistance aimed at resolving an armed conflict that has resulted in thousands of casualties in the country's volatile eastern region.

Clashes between M23 rebels and Congolese forces have been going on in eastern DRC since late 2021. Thousands of people have been killed and more than 3 million others have been displaced from their homes.

DRC President Felix Tshisekedi recently proposed selling mineral rights to the United States in exchange for military support, seeking to secure military training, equipment and possibly direct U.S. military involvement to support the DRC army's fight against the M23 rebels. The rebels are reported to be backed by Rwanda, a charge Kigali has denied.

Earlier this month, the United States expressed interest in the deal, saying it would grant American firms access to minerals for its energy and defense technologies.

Some analysts in the DRC are optimistic that the talks will result in a win-win partnership that will not jeopardize the economic interests of Kinshasa's other major trading partners.

"I don't foresee any clash. I just see some sort of complementarity. The U.S. can come in places where they are needed, where the government believes they can strike a good deal - a deal that will benefit the people that will benefit the security of the country," said Lino Nshimba, president of the U.S. Chamber of Commerce in the DRC.

The DRC is rich in cobalt, coltan, lithium, uranium and other minerals used for advanced technologies.

Many of its citizens hope a deal with the U.S. will benefit them.

"If they are going to come and exploit our minerals and share a percentage of the profits with us and help us restore peace, then that is a good idea, that I will support," said George Yav, a money changer.

Officials from the DRC presidency said a Congolese delegation is expected to travel to Washington D.C. next month to discuss the deal further.

DR Congo considers minerals-for-security deal with US