China boosts yuan support after Moody’s outlook cut

China strengthened its support for the yuan through its daily reference rate after market sentiment took a hit by Moody’s Investor Service’s downgrade of its credit outlook.

The People’s Bank of China (PBOC) set the daily managed currency reference rate at 7.1140 per dollar.

The gap was at its highest level in more than two weeks, indicating that Beijing was stepping up its efforts to prevent a decline in China’s currency.

The yuan’s domestic price fell 0.1% on Wednesday to around 7.160 yuan per dollar. It has also fallen more than 3% against the dollar since the beginning of this year.

“Policymakers want to emphasize the messages of yuan stability and not allow Moody’s to block their efforts,” said Christopher Wong, strategist at Overseas Chinese Banking.

“The market cannot exclude policymakers’ intervention if there are significant fluctuations in the yuan,” he added.

Moody’s cuts China’s credit outlook to negative

Moody’s Ratings Agency downgraded its outlook on the Chinese government’s credit rating from stable to negative, citing slowing economic growth in the medium-term and the continued shrinking real estate sector.

Moody’s affirmed China’s ratings for long-term domestic and foreign currency exports at A1 and said it expected the country’s annual GDP growth to reach 4.0% in 2024 and 2025, according to “Reuters.”

“The change in negative outlook reflects growing evidence that authorities will have to provide financial support to heavily indebted local governments and government companies, posing widespread risks to China’s financial, economic, and institutional strength,” Moody’s said in a statement.