On Wednesday, the market yuan fell by 0.1 percent to 7.33 yuan against the dollar, the lowest for China's financial system since September 2023.
Transmitted by UNN with reference to the Financial Times.
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China's currency has hit a 16-month low: on Wednesday, January 8, the Chinese yuan fell by 0.1% to 7.33 yuan per dollar. This is the lowest level since September 2023. Among the reasons are the worries associated with the introduction of Trump's tariffs.
According to analysts, Trump's proposed high tariffs on Chinese goods will force the People's Bank of China (PBOC, Chinese: 中国人民银行) to weaken the yuan to offset their impact on exports. It should be noted that against the backdrop of weak domestic consumer demand, it is exports that help China maintain economic growth.
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On the eve of , expectations that the Federal Reserve will cut rates more slowly than previously expected increased. In turn, China is easing its monetary policy to combat deflationary pressures.
“The market is impatient and wants a sharp rise in the yuan,” said Wee Hong Chong, senior market strategist at BNY.
China on the eve of higher costs
Beijing, which is grappling with deepening deflationary pressures in the economy caused by low household and investor confidence, is gradually shifting to more stimulus measures to boost growth. On Wednesday, it expanded a program to subsidize consumers who trade in old appliances such as air conditioners and washing machines.
But many economists believe that the company is postponing the announcement of additional spending plans while it awaits Trump's inauguration to get more clarity on potential tariffs (Trump previously said he would impose 60 percent tariffs on China).
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The NBK “doesn't really have any good options,” experts say.
It will have to accept some exchange rate weakness as the least bad option. The question then becomes: where will the NBK draw the line?
At the same time, analysts note that although the yuan is under selling pressure against the dollar, it has strengthened against other currencies.
The Thai baht, Indonesian rupiah, Philippine peso, Taiwan dollar, and Korean won all weakened by 0.4% against the dollar on Wednesday.
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