The Chinese yuan decreased today, Thursday, to its lowest level against the dollar since the global financial crisis in late 2007, with the central bank reduced its expectations for the sixth consecutive trading session, in light of the escalation of trade tension between China and the United States.
The yuan decreased locally to 7,3518 of the dollar in early trading, its lowest level since December 26, 2007.
The yuan lost about 1.2% this month.
China imposed heavy customs duties on US imports in response to similar US measures.
Despite US President Donald Trump’s statement to reduce the recently imposed customs duties on dozens of countries, the customs duties on Chinese goods have increased.
“The United States and China are currently playing a dangerous game to compete for influence … until an agreement is announced or confirmed a large bilateral meeting, the dollar and the Chinese yuan will now be the focus of attention in the foreign exchange market,” said Chris Turner, head of the global markets at iNG Bank.
The weak yuan would make Chinese exports cheaper, and reduce the impact of customs duties on the economy.
However, analysts and economists said that the sharp decline may increase the pressure of unwanted capital flows, and threaten financial stability.
Informed sources told Reuters that the Chinese Central Bank will not allow sharp declines in the value of the yuan, and that it issued instructions to major government banks to reduce their purchases from the dollar.
