The yuan descended to its weakest stance against the dollar in approximately a year, as market players increased pessimistic bets amid lackluster growth in China and fears of escalating U.S. tariffs.
The onshore yuan dipped up to 0.3%, marking 7.2970 against the dollar, its most feeble point since November 2023. Tuesday saw the Bloomberg Dollar Spot Index inch towards a two-year high.
The yuan lagged behind its Asian counterparts throughout November due to predictions of potential U.S. tariffs next year under the Trump administration, expected to compound China’s economic difficulties. Despite a slew of stimulus measures from Beijing, investors remain unimpressed as the residential market in the nation continues to slump.
After Trump’s success in the early November U.S. elections, China’s central bank, the People’s Bank of China, has been safeguarding the yuan from rapid devaluations by setting the daily fixing at more robust-than-anticipated levels. To solidify its support for the currency, on Tuesday, Beijing rolled out a reference rate that exhibited the most substantial strong bias since August vis-a-vis market forecasts.
Khoon Goh, head of Asia Research at Australia & New Zealand Banking Group noted that in the face of lingering tariff apprehensions, the yuan continues its downward trajectory. While authorities are presently averting further depreciation by maintaining the fix marginally above the 7.20 mark, there’s still a chance for further weakening of the spot.
As per analysts, the yuan might plummet to a level unseen in 17 years against the dollar by 2025, with bearish observers forecasting an approximately 10% drop. Concurrently, currency traders are considering if the Federal Reserve might implement an interest rate cut this month based on a speculated upswing in U.S. employment for November.
