Yuan edges down as new Fed head takes office

Leadership shift to lead to short-term market fluctuations: expert

The onshore and offshore yuan slipped slightly on Monday following the leadership change at the U.S. Federal Reserve.

As of 6:30 p.m. Beijing time on Monday, the offshore yuan had slipped by 0.29 percent, while the onshore yuan had edged down by 0.18 percent.

Monday marked the first day for Jerome Powell as the new head of the U.S. Federal Reserve.

Cong Yi, an economics professor at the Tianjin University of Finance and Economics, said that the change in leadership would naturally lead to some short-term market fluctuations, as there must be speculative investors who want to make use of this news to gain profits.

"There have been market speculations that Yellen was relatively mild, and the new head will be more resolute in raising interest rates of the U.S. dollar," he told the Global Times.

But Cong stressed it is in fact very unlikely that Powell would bring many personal traits into the Fed's future policymaking. Instead, he is very likely to hold on to the policy tone set by Janet Yellen.

"The current trends of the U.S.' policy are to raise U.S. dollar interests and unwind the U.S. balance sheet. Powell will also stick to those trends, in my judgment," Cong noted.

Liu Xuezhi, a senior expert of macroeconomics at the Bank of Communications, told the Global Times on Monday that the change in Fed leadership will not alter the Fed's slow pace of U.S. dollar interest rate hikes.

Fortune magazine reported on Saturday that Powell is expected to raise interest rates three to four times in 2018.

The Fed raised the U.S. dollar's interest rates five times during Yellen's term.

"The interest rate hikes theoretically would cause the dollar to become strong, but in fact, the dollar has been edging down. This shows that there are lurking risks, like liability bubbles, to the U.S. economy," Cong said.

Liu said that the U.S. dollar's depreciation could be a short-term status. "The yuan won't maintain its appreciation trend for a very long time," he said. Cong also noted that the U.S.' future interest rate hikes would add to capital outflow risks in China, but such pressure would not be too intense.