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The Chinese market saw a major downturn today as the Chinese currency, the renminbi, or the yuan has reportedly weakened on 81 pips to 6.8998 against the United States dollar as had been reported by the China Foreign Exchange Trade System.
In China’s spot foreign exchange market, the yuan had been allowed to rise or fall by two per cent from the central parity rate each trading day.
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The central parity rate of the yuan against the dollar was based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
The financial exchange market is in a bit of a quagmire as the exchange rate between the Euro and the United States dollar peaked at the same spot on Tuesday for the first time in 20 years.
As of Tuesday morning Greek time, one euro was measuring equal to exactly one dollar, which meant that the value of the euro has been dropped down by over 12 percent compared to its value at the beginning of the year. This means that the euro is at its weakest against the dollar since winter of 2002, twenty years ago.
While the news comes off as being positive for Americans who have been conducting business and traveling in Europe, it is a worrying sign for the health of the global economy.
The euro has been significantly weakened by Europe’s energy crisis due to the conflict in Ukraine. Russia supplied nearly 40 percent of Europe’s gas before the war with Ukraine, and the bloc has since attempted to reduce dependence on fuel from the country. Euro and dollar equal in value after fuel crisis, inflation
This has come in the form of sanctions and partial bans against Russian gas and fuel in the EU, as well as attempts to source fuel from other countries.
In retaliation, Russia has cut back supplies of fuel to European countries that depend on it. The Nord Stream pipeline, which links Russia to Germany, was shut down on Monday for ten days.