The Chinese yuan collapsed against the U.S. dollar again. For the last two days, the yuan has tumbled at the most since 2008. On January 26, the yuan’s value to the U.S. dollar was the lowest since 2012.
Importantly, the USD/CNY pair is trading at extreme points for the first time since the limit for the pair’s intraday fluctuation was set at 2%.
Against the euro, the situation is opposite. The EUR/CNY pair dropped below 7.00. It means the strong reinforcement of the Chinese currency against the euro for the last 4 years. The market seems to be affected by the Swiss National Bank's decision to abandon pegging the franc’s exchange rate to the euro, the launch of the QE program by the European Central Bank, and the election in Greece.
Trading is usually marked by low liquidity during the period of China’s New Year celebration. In this context, the ongoing market moves cannot be considered good signs.
The U.S. dollar is rising in value against all world currencies. So, many countries tend to settle mutual payments excluding the U.S. currency. Beijing entered into a swap agreement even with Ukraine last week.
The data released by China Customs Statistics proves a decline of the OPEC oil imports. On the other hand, China’s oil imports from Russia rocketed by 36% in 2014. China bought 8% less oil from Saudi Arabia and 11% less from Venezuela. The Russian share on the Chinese oil market increased to 11% in 2014 from 9%.
Oil supply is likely to exceed 30 million tons in 2014 and rise to more than 50 million tons by 2020, according to the forecast of Suhant Gupta from Wood Mackenzie.
China and Russia develop massive-scale projects and make estimates in their national currencies. Chinese oil companies take charge of their stakes in the Russian oilfields. But Beijing wants to make sure that the Russian economy will not get worse.
