At present, the US currency dollar is getting the direct benefit of the increasing economic difficulties in China. All the new figures related to China's economy have been disappointing. Because of this, China has cut its interest rate. According to analysts, this move of China has surprised the operators of the international market. At a time when the trend in the whole world is to increase the interest rate, China has taken the opposite step.
New data on industrial production, retail sales, and fixed-asset investment in China were released on Monday. All these figures were below expectation. This indicated that the crisis in the Chinese economy was increasing. With this news, the fear of recession already looming around the world has intensified. Meanwhile, the Central Bank of China - the People's Bank of China has announced a cut in the interest rate.
According to experts, China is paying an expensive price for the zero Kovid policy. Cases of corona infection are still coming to the fore in the country. In those places, the Chinese authorities impose strict restrictions. It has an impact on economic activities. This has a clear impact on industrial production, retail sales, and capital investment.
Ipek Ozkardeyskaya, a strategist at a market agency named Swissquote, told American TV channel CNBC, "Certainly the impact of the poor data in China has been felt on the ongoing slowdown concerns in the rest of the world." Due to the deepening of apprehensions, the trend of investing in dollars among investors has increased further. Its bad effect has been seen on the yuan and the euro.
In the past months, the US Central Bank has proceeded with the policy of raising the Federal Reserve interest rate. The Federal Reserve adopted this policy to control inflation, but because of that investing in dollars has become more profitable. Investors expect the Federal Reserve to continue raising interest rates for now. Investment agency Richmond Fed chairman Thomas Barkin said last week that the Federal Reserve's stance would probably continue until inflation comes down to 2 percent. At present, this rate is above eight percent.
Ken Cheung, the investment strategist at Mizuho Bank, told CNBC: "The spread of Kovid and the collapse of the property sector continue to pose risks to the Chinese economy. That is why the People's Bank of China has cut interest rates, despite warnings about inflation and the excessive liquidity in the market. Its purpose is to increase the demand in the country.
According to experts, due to this move, investors have started investing in dollars by moving away from Yuvan. But its trend is expected to hit other currencies including the euro. Analysts have said that financial and monetary markets around the world are already in turmoil. Now the latest move of China has given a new blow to the market.
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