China’s currency fell to its lowest level in 16 months amid fears that possible steep tariff hikes under the new Trump administration could hurt growth prospects for the world’s second-largest economy, according to the FT.
The onshore renminbi fell 0.1% to 7.34 yuan per dollar on Wednesday, the weakest level since September 2023, despite the People’s Bank of China (PBoC) keeping the rate steady ahead of Donald Trump’s inauguration Trump this month.
The Chinese currency is allowed to trade within 2% of the daily rate set by the central bank, and the exchange rate is approaching the lower end of this trading range.
“The market is impatient and wants an explosion”
The selling pressure partly reflects fears that steep tariffs on Chinese goods, proposed by Trump, would force the PBoC to weaken the renminbi to offset the impact on exports, which have helped the country maintain economic growth despite weak domestic consumer demand.
“The market is impatient and wants an explosion in the renminbi,” said Wee Khoon Chong, chief market strategist at BNY.
On Wednesday, the PBoC announced a daily fixed rate of 7.1887 yuan per dollar, almost unchanged from Tuesday’s rate of 7.1879 yuan. However, pressure on the exchange rate increased after strong US economic data strengthened the dollar on Tuesday.
The central bank wants to maintain a stable exchange rate
The selling pressure on the renminbi is “essentially a reflection of Trump’s trade policy,” said Ju Wang, head of currency and rates strategy for expanded China at BNP Paribas. “The market has done this since the US election … we feel that a lot is already being calculated, but the market does not want to give in.”
Wang said the PBoC appears to be “in a wait-and-see mode.”
The central bank wants to keep the exchange rate steady while it waits for more clarity on Trump’s trade policies, analysts said, adding that any slight easing of the peg could risk a massive sell-off in the Chinese currency.
Trump has said he would impose tariffs of up to 60 percent on China.
Chinese shares also fell on Wednesday, with the CSI 300 index of mainland China losing 0.3%, and the Hang Seng index in Hong Kong recording a 1.1% decline, writes Ziarul Financiar.
Source: www.descopera.ro
