Is there a dollar funding squeeze in China?
China could benefit from joining the Fed’s dollar swaps network but political obstacles bar the way
Chinese banks experienced a minor US dollar shortage as companies and banks worldwide scrambled to hoard the greenback due to growing fears over the coronavirus. The rush into the dollar pushed the exchange rate higher, worsening the squeeze.
All the same, funding costs via China’s dollar money market have stayed calm for the past few weeks, while the premium to swap Chinese yuan for US dollars has risen less than that of other currencies, such as the euro and yen. So how much is China at risk
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