Chinese Yuan Falls 0.2% as Officials Consider Weaker Currency Strategy
The Chinese yuan declined against the US dollar after reports indicated that Chinese officials might abandon their “stable currency” policy in response to potential tariffs under President-elect Donald Trump.
China's central bank typically maintains a stable yuan, but historical precedents show strategic devaluation as a response to trade pressures. This tactic was previously employed during 2018 and 2019, helping to make exports cheaper while also posing risks to the domestic economy. A weaker yuan could mean higher costs for Chinese consumers despite lower prices for foreign buyers.
On Wednesday, the yuan dropped approximately 0.2% to 7.26 per dollar, marking a 2.4% loss against the dollar year to date.
This currency movement coincides with President Joe Biden's plans to increase Section 301 tariffs targeting China's cleantech industry. US Treasury Secretary Janet Yellen noted that countries often seek retaliation against unilateral tariff actions, suggesting a similar response from China is likely.
The situation is evolving as the inauguration approaches, indicating ongoing developments in this area.