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China is Intervening to Save FX and Stock Markets

by Abimbola Adu
Sep 26, 2022 - 12:00 am
in Blockchain
China is Intervening to Save FX and Stock Markets

On the 26th of September, Zhang Meifang, the Consul General of China in Belfast, declared, via Twitter, that effective from September 28, China’s central bank will increase the foreign exchange risk reserve ratio for foreign exchange forwards trading from 0 to 20% in an attempt to balance the foreign exchange market and tighten macro-management.

In order to stabilize the foreign exchange market and strengthen macro management, China’s central bank announced to raise the foreign exchange risk reserve ratio for foreign exchange forwards trading from 0 to 20%, with effect from Sep 28. pic.twitter.com/PMaw2sRYjL

— Zhang Meifang (@CGMeifangZhang) September 26, 2022

The adjustment occurred as the foreign exchange market became more erratic, with the U.S. dollar index massively elevating and exerting growing pressure on many other currencies, such as the depreciating yuan.

The rise in U.S. interest rates has hurt international financial markets, weakening non-dollar assets everywhere and causing a capital flight from certain nations and areas.

By strengthening the risk reserve ratio, Chinese banks will be better able to manage the risks imposed by rising U.S. interest rates and keep any consequences within a manageable scale. 

Furthermore, another advantage of strengthening the risk reserve ratio is that it reduces money supply and economic growth, which eventually decreases inflation. It ensures consumer spending does not plummet, and overall, there is stock growth.

While China is trying every means possible to improve foreign exchanges and save stock markets, an asset that is not necessarily affected by devaluation is cryptocurrency.

Cryptocurrencies are assets that have a hedge against devaluation and possible inflation. Decentralization is key to this advantage over fiats. Holding on to assets could be seen as a means of survival. When inflation occurs, cryptocurrency investors can quickly transfer their funds to assets that profit from it or at least stay up with the inflation rate.

Investors can quickly buy or sell well-known cryptocurrencies on exchanges at rates that reflect the current market. Another way for people to use their cryptocurrency investments is through the rising number of traditional businesses that are adopting it.

Recently, the British pound has joined the growing number of weakening non-dollar currencies, going as low as $1.03, the lowest ever recorded in many years. The decline is fueling rumours that the Bank of England will need to call an urgent meeting to hike interest rates.

Tags: ChinaMarketStocks
Abimbola Adu

Abimbola Adu

Abimbola Adu is a crypto content writer with a background in English studies. She is keen on enlightening others about cryptocurrency and blockchains. She enjoys writing poems and spending time with family.

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