Chinese Currency Negatively Impacted by Trade War
New York, NY, May 15, 2019-The trade war is having a negative impact on China's currency, reports the Wall Street Journal.
"Escalating trade tensions have pounded the yuan, reviving questions about China’s willingness to use its currency as a tool of trade policy.
“The currency depreciated beyond 6.9 to the U.S. dollar this week in the offshore market, touching its weakest level since late December. Late Tuesday, it traded around 6.90 offshore-roughly 2.5% weaker over the last seven daily sessions, as trade relations with the U.S. have soured.
“The swoon puts Beijing in a tricky spot. A weaker currency makes Chinese goods cheaper for U.S. buyers, helping offset the impact of higher tariffs. But China is eager to prevent domestic concerns about currency depreciation feeding an exodus of capital and further exchange-rate weakness. A breaching of the symbolically important level of 7 to the dollar could be a trigger.
“The initial scale of any further adjustment need not be that large: Deutsche Bank analysts estimate the yuan would need to weaken just beyond 7 to the dollar to counteract Friday’s imposition of 25% levies on $200 billion of Chinese goods. However, President Trump has said the U.S. could also levy import taxes on an additional $325 billion of products.”