China Reduces Interest Rate, But Yuan Still Weakens, China's central bank cut one of its key interest rates on Tuesday in an attempt to boost economic growth. However, the move had little impact on the yuan, which continued to weaken against the US dollar.
The People's Bank of China (PBOC) lowered the one-year loan prime rate (LPR) by 5 basis points to 3.65%. This is the third time the PBOC has cut the LPR this year, as it tries to support the economy amid a slowdown.
The yuan, however, continued to weaken against the US dollar, trading at 6.77 per dollar on Tuesday. This is the lowest level since March 2020.
Analysts say the weak yuan is a sign that investors are still worried about the Chinese economy. They are concerned about the country's property market, which is facing a crisis, and the impact of the COVID-19 pandemic.
The PBOC is likely to continue to cut interest rates in the coming months in an attempt to boost the economy. However, it is unclear whether this will be enough to prevent the yuan from further weakening.
Japan Announces Strong Economic Data, But Markets Unmoved
Japan announced strong economic data on Tuesday, but markets were largely unmoved. The data showed that the economy grew by 0.5% in the second quarter, beating expectations. This was the fastest pace of growth in two years.
The data also showed that inflation was 0.9% in July, the highest level in two years. This was driven by rising energy prices.
Despite the strong data, markets were largely unmoved. This is likely because investors are focused on the Federal Reserve's plans to raise interest rates. The Fed is expected to raise rates in September, and this is likely to weigh on global growth.
It is possible that the strong Japanese data will eventually start to matter to markets. However, for now, investors are focused on other issues.
In conclusion, China's interest rate cut had little impact on the yuan, while Japan's strong economic data was largely ignored by markets. This highlights the current focus of investors on the Federal Reserve's plans to raise interest rates.