1 week Ago
HONG KONG, April 9 — China’s yuan ended at its weakest level in more than 17 years today after its offshore counterpart fell to a record low overnight, as an escalating Sino–US trade war rattled currency markets. The onshore yuan finished the domestic trading session at 7.3498 per US dollar, its weakest close since December 2007.
The declines come as a trade war between the world’s two largest economies escalates. US President Donald Trump’s “reciprocal” tariffs on dozens of countries took effect today, including massive 104 per cent duties on Chinese goods. China’s top leaders plan to meet as soon as today to hammer out measures to boost the economy and stabilise capital markets, people with knowledge of the matter said.
While despite the tariff pressure, China’s central bank will not allow sharp yuan declines and has asked major state-owned banks to reduce US dollar purchases, people with direct knowledge of the matter said today. “Unless they are rolled back, the latest US tariff hikes mean that China’s shipments to the US will more than halve over the coming years, even assuming the renminbi weakens to 8 to the dollar,” Capital Economics said in a note to clients. “This will reduce China’s GDP by somewhere between 1.
0–1.5 per cent depending on the extent of rerouting (exports through other countries). That’s a larger hit than we had assumed but will probably be met with a further expansion in fiscal support.
” The offshore yuan pared losses and climbed about 0.7 per cent to 7.3769 Chinese yuan per US dollar in Asian trade, after sinking more than 1 per cent in the previous session and hitting its record low of 7.
4288 overnight. Market Stabilisation The People’s Bank of China today set the midpoint rate — around which the onshore yuan is allowed to trade in a 2 per cent band — at 7.2066 per US dollar, the lowest since September 11, 2023.
Based on the fixing level, the yuan is allowed to drop as far as 7.3507, a whisker stronger than the 7.3510 low struck in September 2023.
The fixing was 1,282 pips firmer than a Reuters estimate, suggesting the central bank is reluctant to see a drastic depreciation of the currency. Chinese state-owned banks were busy selling US dollars in the onshore spot market to slow the pace of yuan declines early today morning, according to two people familiar with the matter. Still, both the onshore and offshore yuan have fallen more than 1 per cent so far this month, leaving them weaker since the start of the year, pressured by fears of the tariffs impact.
Trump on yesterday accused China of manipulating its currency to offset the impact of tariffs. A weaker yuan would make exports cheaper and alleviate some pressure on China’s trade and the broader economy, but a sharp decline could fuel unwanted capital outflow pressure and risk financial stability, economists said. — Reuters.
