Chinese authorities will maintain their tight grip on the yuan and allow it to w...
BENGALURU - Chinese authorities will maintain their tight grip on the yuan and allow it to weaken further against the dollar to fight an ongoing trade war with Washington and a slowing domestic economy, a Reuters poll of strategists showed.In response to U.S. tariffs on $30 billion of Chinese imports that came into effect this week, the People’s Bank of China set its yuan mid-point at an 11-1/2-year low versus the dollar.
The latest Aug. 29-Sept. 4 Reuters poll of nearly 60 strategists showed the yuan is expected to trade around 7.19 to the dollar in six months, over 0.5% weaker than Wednesday’s 7.15, before readjusting to 7.16 in a year.“For currency markets, the last month’s tariff-inspired yuan fall is much more important than it would have been were China still a minor player in global trade,” said Kit Juckes, FX strategist at Societe Generale in London. “U.S.
“There’s a risk the U.S. retaliates to yuan weakness, or to other currencies falling as a result of the yuan weakening. More tariffs could see more yuan weakness and more risk President Trump reacts to that, too. Dominos can fall over,” added Juckes. While a weaker yuan is good for the world’s largest exporter of manufactured goods, a weaker currency is likely to be limited in its ability to cushion the blow from import taxes imposed by the United States.
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