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In Depth: Behind the Yuan’s Tumble Against the Dollar

The yuan’s recent weakening has been dramatic, but to many, it wasn’t a surprise.

Analysts were already predicting late last year that the yuan’s appreciation since June 2020 — due to a combination of surging exports and capital inflows — could lose steam, especially once the U.S. Federal Reserve started raising interest rates to tame inflation.

However, they did not anticipate that China would soon be battling its worst outbreak of Covid-19 going back to early 2020. Since January this year, authorities in many cities have been enforcing widespread lockdowns and mass testing to contain the virus, worsening an economic slowdown.

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