The break in the yuan below the key threshold of 7.0 to the US dollar, analysts said, was likely to be a deliberate decision made by the People's Bank of China, China's central bank, which has now decided that the currency can be part of its arsenal in fighting the trade war.
The People's Bank of China governor, denied in a statement on Monday evening that the central bank would use the yuan exchange rate as a trade war weapon, saying the yuan exchange rate's movement was "Driven and determined by the market".
If China decided a [trade] deal has become a long-range project, it might decide it's time to manage the US dollar-RMB for China's own short-run objectives instead of an elusive agreement Cliff Tan, MUFGIn a statement on Monday, the PBOC explicitly linked the yuan's sharp decline to the new US tariff threat, suggesting that it was comfortable letting the yuan break the psychologically important 7.0 threshold.
"Due to the effects of unilateralism and trade protectionist measures and the imposition of tariff increases on China, the yuan has depreciated against the US dollar today, breaking through 7 yuan, but the renminbi continues to be stable and strong against a basket of currencies," the PBOC said in the statement.
Tan Yaling, president of the Beijing based China Forex Investment Research Institute, said the speculators had made full use of the stalled China-US trade talks to bet against the yuan exchange rate, but that those bets were unsustainable.
The PBOC said the yuan had depreciated due to the effects of unilateralism and trade protectionist measures and the imposition of tariff increases on China.
A moderate decline in the yuan could help the Chinese economy to gain an edge in the trade war, especially if the US continued to escalate the conflict, said Robin Xing, chief China economist at Morgan Stanley.
https://www.scmp.com/economy/china-economy/article/3021517/china-exchange-rate-drop-could-continue-2020-it-tries-offset
The People's Bank of China governor, denied in a statement on Monday evening that the central bank would use the yuan exchange rate as a trade war weapon, saying the yuan exchange rate's movement was "Driven and determined by the market".
If China decided a [trade] deal has become a long-range project, it might decide it's time to manage the US dollar-RMB for China's own short-run objectives instead of an elusive agreement Cliff Tan, MUFGIn a statement on Monday, the PBOC explicitly linked the yuan's sharp decline to the new US tariff threat, suggesting that it was comfortable letting the yuan break the psychologically important 7.0 threshold.
"Due to the effects of unilateralism and trade protectionist measures and the imposition of tariff increases on China, the yuan has depreciated against the US dollar today, breaking through 7 yuan, but the renminbi continues to be stable and strong against a basket of currencies," the PBOC said in the statement.
Tan Yaling, president of the Beijing based China Forex Investment Research Institute, said the speculators had made full use of the stalled China-US trade talks to bet against the yuan exchange rate, but that those bets were unsustainable.
The PBOC said the yuan had depreciated due to the effects of unilateralism and trade protectionist measures and the imposition of tariff increases on China.
A moderate decline in the yuan could help the Chinese economy to gain an edge in the trade war, especially if the US continued to escalate the conflict, said Robin Xing, chief China economist at Morgan Stanley.
https://www.scmp.com/economy/china-economy/article/3021517/china-exchange-rate-drop-could-continue-2020-it-tries-offset
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