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Chinese yuan hits weakest level in decade

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yi wang pboc people's bank of china central bank
China’s
Central Bank Governor Yi Gang delivers a speech at the China
Development Forum at the Diaoyutai State Guesthouse in Beijing,
Sunday, March 25, 2018. Yi outlined sweeping plans Sunday to rein
in rising debt and financial risk, but expressed confidence that
Beijing can prevent potential dangers.

AP/Emily Wang

  • The Chinese yuan slid to its weakest level in a decade
    Tuesday.
  • Breaching a key level of 7 per dollar could trigger
    capital flight and market volatility. 

  • Watch
    the yuan trade in real time here.

The


Chinese yuan


 slid
to its weakest level against the dollar in more than a decade on
Tuesday, raising questions about how far policymakers might let
the currency fall. 

The People’s Bank of China set
the dollar’s reference rate, a range for domestic trading that
officials set daily, at 6.9574 yuan per US dollar. The currency
subsequently fell to as low as 6.9750 against the greenback, its
weakest since May 2008.


Escalating trade tensions
between Washington and Beijing have
added pressure to an already slowing Chinese economy, raising
speculation about how far the central bank might let the currency
fall. On Monday, President Donald Trump said his administration
was ready to place tariffs on all remaining Chinese imports to
the US if trade talks don’t go anywhere.


Reuters reports

officials are expected to stop
the currency from sliding past a key psychological level of 7 per
dollar in the near term, which could trigger capital flight and
market volatility.

Hussein Sayed, chief market
strategist at FXTM, noted Chinese equities could reverse if the
currency weakens past that level. The Shanghai Composite closed
up 1% at 2,568.05 on Tuesday.

“The yuan’s weakness also
reflects lack of confidence as more stimulus means more fiscal
deficit, a negative factor in the longer run,” he added.

Economists at Deutsche Bank wrote
in a recent research note that they expect China to continue to
ease policy in efforts to combat trade tensions, possibly letting
the yuan fall to as low as 7.4000 next year.


Chinese yuan
Markets
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