China Allows Yuan to Trade Beyond 7.2 Level Amid Tariff Pressures

China has allowed the yuan (CNY) to depreciate beyond 7.2 per dollar, a key threshold, possibly in response to U.S. tariffs. This marks a shift towards managed depreciation aimed at making Chinese exports more competitive.

Key points:

The People's Bank of China set the daily yuan fix at 7.2038 per dollar, the weakest rate since September.
The yuan is not fully floating and trades within a 2% range of the daily fix.
Analysts suggest this depreciation may lead to capital flight into cryptocurrencies like Bitcoin.
Historical context: In 2015, a significant yuan devaluation initially caused Bitcoin prices to drop but subsequently surged nearly 60% in four months.
Regulatory challenges exist, as China has tightened anti-crypto measures, requiring banks to monitor suspicious transactions and report risky crypto trades.
The Supreme People’s Court has increased legal risks for individuals using cryptocurrencies, complicating capital movement amidst economic uncertainty.