Weakened Chinese Yuan Likely Lost Value In Tariff Retaliation

The Chinese currency Yuan faced a loss in value against the dollar as it breached the 7 level during the afternoon market. This was the first time after the global recession in 2008 that onshore Yuan reached at 7.0304 against dollar and offshore Yuan went to 7.0807 against greenback.

This is happened in the last week after USA’s President Donald Trump unexpectedly announced the new tariffs plans over Chinese goods which are going to be adopted starting September 1^st.According to Claudio Piron from Bank of America Merrill Lynch, this is the retaliation tactic of China that they have been avoiding previously. After Trump’s announcement about the new tariffs, Chinese foreign ministry issued a statement claiming that china doesn’t want a trade war, but isn’t scared to fight one either.

Claudio Piron has also said that this drop is the result of fixing the rate at 6.9 by the People’s Bank of China. The People’s Bank of China has said that they will easily stabilize the Yuan and it is not an issue. Economists have said that investors should wait and see the progress of the currency for a bit before going and investing. Vishnu Varathan who is the head of economics & strategy at the Mizuho Bank, said that they are looking out for how America interprets this as they can always come with the Currency intervention slant.

Trump has accused china for multiple times in the past for manipulating their currency although his administration has always avoided calling China currency manipulator. Bank of America Merrill Lynch’s Claudio Piron also stated that people are discussing several recourses on the issue of foreign currency depreciation like attempts by congressmen to put new bills through congress, to make dollar depreciate.  He also added that such attempt would be futile as if they keep depreciating their currency in trade war and no one is going to win.