“Yuan falls to 16-month low amid possible Trump tariffs on Chinese goods The Chinese currency fell to 7.33 yuan per dollar, its lowest level since September 2023. Experts attribute the drop to Trump’s possible introduction of 60% tariffs on Chinese goods.”, — write on: unn.ua
Transfers UNN with reference to the Financial Times.
Details
China’s currency hit a 16-month low, with the Chinese yuan falling 0.1% to 7.33 yuan per dollar on Wednesday, January 8. This is the lowest reading since September 2023. Among the reasons is the excitement associated with the introduction of Trump’s tariffs.
According to analysts’ estimates, Trump’s proposed high tariffs on Chinese goods will require the People’s Bank of China (NBC, Chinese: 中国人民电影) to weaken the yuan to offset their impact on exports. It should be noted that against the background of weak domestic consumer demand, it is exports that help China maintain economic growth.
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On the eve, expectations that the Federal Reserve System will lower rates more slowly than previously expected increased. In turn, China softens monetary policy to combat deflationary pressure.
“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 increased costs
Beijing, grappling with deepening deflationary pressures on the economy caused by low household and investor confidence, is gradually moving to more stimulative measures to spur growth. On Wednesday, it expanded a program to subsidize consumers who trade in old appliances such as air conditioners and washing machines.
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But many economists believe the company is delaying announcing plans for additional spending pending Trump’s inauguration to gain more clarity on potential tariffs (Trump has previously said he would impose 60 percent tariffs on China).
Addition
According to experts, the NBK “actually has no good options”.
He will have to accept some exchange rate weakness as the least bad option. Then the question arises: 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, Korean won all weakened 0.4% against the dollar on Wednesday.
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