The yuan has fallen to a 16-month low after strong U.S. economic data overnight and the possibility of significant tariff increases by the incoming Trump administration heightened concerns about the growth prospects of the world’s second-largest economy.
The onshore yuan fell 0.1% to 7.33 yuan against the dollar on Wednesday, its lowest level since September 2023, even as the People’s Bank of China kept interest rates steady ahead of Donald Trump’s inauguration this month.
China’s currency is allowed to trade within 2% of the daily rate set by the central bank, and the exchange rate is close to the lower end of that trading range.
拋售壓力在某種程度上反映出人們擔心川普提出的對中國產品徵收高額關稅將迫使中國央行貶值人民幣以抵消其對出口的影響，而出口有助於中國在國內消費需求疲軟的情況下維持Economic Growth.
Strong U.S. jobs and services data on Tuesday also reinforced expectations that the Federal Reserve will cut interest rates more slowly than previously expected, while China is easing monetary policy to combat deflationary pressures.
“The market is impatient and wants the yuan to appreciate sharply,” said Wee Khoon Chong, senior market strategist at Bank of New York.
The People’s Bank of China has announced its determination to maintain “basic stability” of the yuan and will not allow the market exchange rate to “overshoot.”
Beijing is grappling with deflationary pressures on the economy caused by low household and investor confidence and is increasingly turning to more stimulus to boost growth. On Wednesday, the government expanded a subsidy program for consumers trading in used home appliances such as air conditioners and washing machines.
But many economists believe the administration will delay announcing more spending plans while waiting for Trump to take office on January 20 for further clarity on potential tariffs. The president-elect said he would impose tariffs of up to 60% on China.
The People’s Bank of China announced on Wednesday that the daily central parity rate of the yuan against the U.S. dollar was 7.1887 yuan, little changed from Tuesday’s central parity rate of 7.1879 yuan. But pressure on the currency increased after strong U.S. economic data pushed the dollar higher on Tuesday.
Wang Ju, head of foreign exchange and interest rate strategy for Greater China at BNP Paribas, said the selling pressure facing the yuan is “essentially a reflection of Trump’s trade.” “The market has been doing this since the U.S. election… We feel like a lot of factors have been priced in, but the market doesn’t want to give up.
Wang said China’s central bank appeared to be “in a wait-and-see mode.”
Julian Evans-Pritchard, head of China economics at Capital Economics, said the Chinese central bank “really doesn’t have any good options here”. “It has to accept some weakness in the exchange rate as the least bad option. The question then becomes: Where is the bottom line for the Chinese central bank?
Analysts said the central bank wanted to keep the currency stable while waiting for more clarity on Trump’s trade policy, adding that any slight easing of adjustments could lead to a larger sell-off in the yuan.
In Hong Kong, offshore yuan funding costs have risen in recent days, a sign that China’s central bank is trying to protect the currency from speculators.
While onshore renminbi cannot be traded outside the 2% range set by the People’s Bank of China, there is no such restriction for offshore renminbi.
Chinese stocks also fell on Wednesday, with mainland China’s CSI 300 index down 0.2% and Hong Kong’s Hang Seng Index down 0.9%.
