Yuan exchange rate tumbled 1.3% to $ 7.0344 , after the People’s Bank of China set its daily reference rate at a weaker level than 6.9 for the first time to be its lowest level since December. The China People’s Bank on Tuesday, set the daily currency fixing stronger than analysts expected and announced the planned sale of yuan-denominated bonds in Hong Kong.
On other hand, yuan declined 0.9% in mainland trading last week, its biggest loss since mid-May, after President Donald Trump, abruptly escalated the trade war with new tariffs on Chinese goods.
Yuan and Dollar
The decline makes Chinese imports in the United States less expensive, thus making U.S. companies less competitive. It also lowers profits for U.S. companies that do business in China.
Yi Gang the China’s central bank chief, explained that his nation wouldn’t use the yuan as a tool to deal with trade disputes as well as the yuan will remain a strong currency in spite of recent fluctuations amid external uncertainties.
China Lets Yuan Tumble Past 7 Per
In addition, the PBOC reported that the recent yuan depreciation was decided by the market, not manipulated by China.
Robert Carnell, the Chief Economist in Singapore, reported that are waiting to see the yuan fixing. If they try to push back against today’s move then you could probably conclude that China doesn’t want to see a breach of 7 level. If they don’t, it could mean that yuan weakness is part of their response.
In addition, what’s happening in Hong Kong is causing a high degree of anxiety and uncertainty which could be bearing on prices.
Raised fears that the U.S.-China trade war would keep escalating
In the latest sign of economic tensions between Beijing and Washington, China announced it asked state-owned companies to stop buying U.S. agricultural products, Bloomberg reported.
Later on Thursday, U.S. President Donald Trump, decided to slap 10% tariffs on $300 billion in Chinese imports, stunning markets and ending a month-long trade truce.