The CNY fell to its lowest level in seven months against USD (7,2618) at the beginning of this week and is heading towards its lowest level since 2008 of 7,3498. A weaker Yuan will help stimulate exports, creating inflationary pressure on the Chinese economy through higher import costs, which is precisely what the world's second-largest economy needs right now. China's consumer price index for May rose 0,3% year-on-year, unchanged from April, indicating persistent deflationary pressure. The market expects the CNY to continue weakening further given the possibility that the FED will only cut interest rates once by the end of this year. The upcoming U.S. presidential election also heightens geopolitical uncertainty, particularly with concerns about additional tariffs on Chinese goods if former President Donald Trump is re-elected. A weaker CNY could escalate trade tensions with the U.S. and Europe, both of which have recently announced increased tariffs on Chinese electric vehicles, semiconductors, and medical devices. This may force the Chinese government to consider further devaluation of the CNY to counter potential impacts from increased tariffs. The USD/CNY exchange rate is forecast to reach 7,4 before the U.S. presidential election in November. A significant weakening of the CNY could have a substantial impact on the domestic exchange rate later this year.
The USD/VND interbank exchange rate increased slightly at the beginning of the week that was traded around the SBV's selling price. The free market exchange rate continued to rise on the first day of the week that reaching 25.840 - 25.920.
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