China's yuan dips to lowest in 2 years as the offshore rate slips below a key threshold against the dollar

• The offshore yuan weakened against the dollar Thursday as the US currency rallied.
• China's currency slipped below the key psychological threshold of 7 per dollar for the first time in over two years.

China's yuan weakened to the lowest level since July 2020 on Thursday as COVID-19 lockdowns and the country's slowing growth weigh on its economic outlook.

The offshore currency rate dropped 0.7% to 7.0186 per dollar, slipping below the key 7-per-dollar psychological threshold.

At the same time, the dollar strengthened as Tuesday's hotter-than-expected consumer inflation reading pushed traders to bet on another jumbo rate hike from the Federal Reserve next week, with odds even rising for a 100-basis-point increase.

The yuan's latest slide comes despite efforts by the People's Bank of China to prop it up. The central bank has tried to fix the currency's daily rate above consensus and reduced the ratio for banks holding foreign-currency reserves.

Still, the currency is at a similar level as it was in December 2021 on trade-weighted terms, which could be viewed as moderately expensive against other non-dollar currencies, according to Bloomberg.

Meanwhile, China's foreign exchange reserves sank to their lowest mark since 2018 earlier this month, with the government attributing it to lower asset prices and a strong greenback.