China weakens yuan by most in 2 years
China weakened the yuan by the most in two years on Friday, hours after President Donald Trump called out the currency’s slide.
The People’s Bank of China set the dollar’s reference rate at 6.7671 yuan, guiding the Chinese currency 0.9% lower. The central bank determines a daily exchange rate, known as the fix, based on recent prices, and allows trading as much as 2% above or below that level in mainland China.
"China, their currency is dropping like a rock," Mr. Trump told CNBC on Thursday, as he also complained about European monetary policy. "Our currency is going up. I have to tell you, it puts us at a disadvantage."
However, the central bank’s latest move appeared to track market action: the fix followed a 0.9% drop in the currency’s value onshore, to a one-year low.
On Friday, the yuan dropped immediately in Hong Kong, where trading takes place continuously. It hit 6.8363 per dollar, the weakest level since June 2017. Once trading began in mainland China, the yuan also fell to the lowest level in more than a year. It subsequently regained some ground in both markets.
Concerns about Chinese growth and an escalating trade conflict with the U.S., plus the prospect of diverging interest rates in the two countries, have weighed on the yuan. In the past month through Thursday’s close, it has fallen 5.3% against the dollar and 3.5% against a broader basket of its trading partners’ currencies, according to a Wind Info index.
Gyrations in the yuan can have global significance. A modest devaluation in August 2015 sparked fears about a slowdown in the world’s second-largest economy, sending global stock and commodity prices tumbling. Sharp declines in the yuan that year also triggered capital outflows that China struggled to control.
Write to Saumya Vaishampayan at [email protected]
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