The Chinese yuan touched its weakest level in over 17 years on Thursday following six straight days of weaker midpoint fixes from Beijing, as China gears up for a renewed trade war with the United States. The yuan’s onshore USD/CNY pair- which gauges the amount of yuan required to buy one dollar in local markets- rose as far as 7.3511 yuan- its highest level since late-2007.
The declines come as a trade war between the world’s two largest economies escalates. U.S. President Donald Trump’s “reciprocal” tariffs on dozens of countries took effect on Wednesday, including massive 104% duties on Chinese goods. China’s top leaders plan to meet as soon as Wednesday 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 U.S. dollar purchases, people with direct knowledge of the matter said on Wednesday. “Unless they are rolled back, the latest U.S. tariff hikes mean that China’s shipments to the U.S. 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.
