After plunging to a historic low overnight due to an intensifying Sino-U.S. trade conflict, China’s yuan closed Wednesday at its weakest level in almost 17 years. At 7.3498 to the dollar, the onshore yuan closed the domestic trading day at its lowest level since December 2007.
The decreases coincide with an intensifying trade battle between the two biggest economies. The “reciprocal” tariffs imposed by US President Donald Trump on dozens of nations, including hefty 104% taxes on Chinese goods, went into effect on Wednesday. Trump declared that tariffs on certain economies would be suspended for 90 days, but he also said that levies on China will be increased to 125%.
According to persons who know the situation, China’s top officials are scheduled to meet as early as Wednesday to discuss ways to stabilize the capital markets and strengthen the country’s economy.
People with direct knowledge of the situation said on Wednesday that China’s central bank has urged large state-owned banks to cut back on their purchases of US dollars and will not let significant yuan falls despite the pressure from tariffs.
Even if the yuan depreciates to 8 dollars, China’s exports to the US will more than halve over the next few years unless the recent US tariff increases are reversed, Capital Economics warned in a client note.
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