Chinese Yuan Hits Weakest Level Since 2008 Financial Crisis By

By Ambar Warrick 

Investing.com– The Chinese yuan slumped to its weakest level since the 2008 financial crisis on Wednesday, as a flurry of hawkish comments from Federal Reserve officials and deepening concerns over the Chinese economy battered the currency.

The fell 0.7% to 7.2244, its weakest level since late-2007. The currency plunged over 13% this year, reeling from a severe slowdown in the Chinese economy and a hawkish Fed. 

The yuan plunged to a record low in on Wednesday. 

The currency has also come under increased pressure from a growing gulf in local and international interest rates. The People’s Bank of China is among the few central banks cutting interest rates this year, as the bulk of its peers hiked rates to stave off rising inflation. 

China, on the other hand, is facing cooling inflation levels amid waning economic growth. The country’s economy barely expanded in the second quarter, and is likely to face a contraction in the three months to September. 

China has also rolled out a slew of stimulus measures this year, increasing local liquidity conditions and further denting the yuan. The government is now trying to maintain a precarious balancing act between boosting economic growth and stemming further yuan weakness. 

Overnight, St. Louis Fed President James Bullard warned that the U.S. faced a “serious inflation problem,” likely hinting at more monetary policy tightening as the country struggles with inflation at 40-year highs.

Minneapolis Fed President Neel Kashkari was less subtle in his foreshadowing, stating that there was a “lot of tightening in the pipeline.” U.S. interest rates are up 300 points this year, and are likely to end the year around 4.4%, their highest in 16 years.

Kashkari and Bullard’s comments come just a few days after the and warned that it would risk economic weakness in combating inflation. The hawkish signal sent ripples across global financial markets, with the yuan and its Asian peers facing extended selling.

The , on the other hand, surged to new 20-year peaks.