Article: The use of the yuan in international settlements has sharply decreased
Source: https://ru.investing.com/news/forex-news/article-2552733
Context:
Analysts are not sure what could have been the main factor in the decline, but some note the easing of pressure on the yuan exchange rate, which was intense in the first half of the year. The yuan strengthened for the third month in a row in September and briefly reached 7 yuan per dollar, as investor sentiment towards the Chinese economy improved amid a number of stimulus measures to support growth.
"After the pressure on the yuan eased, companies may have felt less inclined to use local currency settlements and may have started using their dollar reserves," said Ken Cheung, chief Asian currency strategist at Mizuho Bank. "The exact conclusion regarding the cause as well as the sustainability of the decline in the yuan's share remains unclear without additional data."
What is meant - in simple words
The expression "pressure on the yuan has eased" means that the exchange rate of the yuan (Chinese currency) It has become more stable or strengthened against other currencies, in particular the US dollar. This can happen when, for example, Chinese economy shows growth or when investors start to trust the yuan more.
When the pressure on the yuan eases, companies that do business in China may feel that there is no need to convert their money into yuan for settlements. They can use their dollar reserves if they assume that using the dollar will be more profitable or convenient. This may be because the dollar is a more widespread and stable currency in international markets, as well as because companies may face fewer risks associated with changes in the yuan exchange rate.
In other words, the risks associated with fluctuations in the yuan exchange rate are decreasing. In this case, companies and investors may begin to trust the yuan more and consider it as a more stable currency for storing their funds in it, rather than for settlements.
Thus, the easing of pressure on the yuan leads to a decrease in the desire to use this currency for settlements, and companies may prefer to make their transactions in dollars.
