- Yuan drops to weakest level since December 2007.
- U.S. imposes 125% tariffs on Chinese imports.
- China’s central bank intervenes to stabilize the currency.
Yuan Plummets Amid Escalating Trade Disputes
The Chinese yuan has depreciated to its lowest point in 18 years, reaching 7.3498 per U.S. dollar in onshore trading. This significant drop follows the U.S. government’s decision to impose a 125% tariff on Chinese imports, intensifying the ongoing trade conflict between the two nations.
In response to the escalating tariffs, the People’s Bank of China (PBOC) has taken measures to prevent further devaluation of the yuan. These include setting a stronger-than-expected midpoint rate and directing state-owned banks to limit dollar purchases. Despite these efforts, the offshore yuan also experienced a decline, hitting a record low of 7.4288 before a slight recovery.
Economic Implications and Global Repercussions
Analysts warn that the sustained depreciation of the yuan could have far-reaching effects on the global economy. A weaker yuan makes Chinese exports more competitive, potentially offsetting the impact of U.S. tariffs. However, it also raises concerns about capital outflows and financial instability within China.
The U.S.-China trade tensions have led investors to seek safe-haven assets, resulting in gains for currencies like the Japanese yen and Swiss franc. Meanwhile, risk-sensitive currencies, including the Australian dollar, have weakened.
Looking Ahead
As the trade dispute continues, the PBOC faces the challenge of balancing currency stability with economic growth. While further depreciation of the yuan could support exports, it risks triggering capital flight and undermining investor confidence. The situation remains fluid, with global markets closely monitoring developments in the U.S.-China trade relationship
