Yuan Hits Lowest Level Against Dollar Since November 2023 in China

Forex - In China's domestic market, the yuan fell to nearly a 14-month low against the US dollar this morning, reaching a level of 7.3382. Before the market opened, the People's Bank of China set the yuan's midpoint at 7.1879 per dollar, 1.037 pips stronger than Reuters' estimate.

China's currency has been under pressure in recent months due to ongoing concerns about the country's growth and escalating trade tensions with the US amid President Donald Trump's threats of higher tariffs. Christopher Wong, a strategist at Oversea-Chinese Banking Corp., stated, "The current fixing model sends a strong message that the PBOC is doing whatever it takes to maintain relative stability in the yuan. Policymakers will likely rely on a combination of tools such as daily adjustments and offshore funding constraints to manage the yuan."

Nevertheless, Wall Street banks speculate that Beijing may allow further depreciation of the yuan, predicting it could fall to 7.5 per dollar by 2025. Fiona Lim, a senior strategist at Maybank, commented, "Given the risk of a new trade conflict between the US and China in Trump's second term, the market understandably leans bearish on the yuan. However, before this happens, Chinese officials will want to prevent such bets on the yuan from growing exponentially. A weak yuan tends to undermine confidence in the financial markets."