China's currency Yuan fell to its weakest level in over 17 years on Wednesday, closing at 7.3498 per U.S. dollar, its lowest since December 2007, according to data from the China Foreign Exchange Trade System, Reuters reported. The drop followed a sharp overnight plunge in the offshore yuan, which touched a record low of 7.4288 before recovering slightly in Asian trading.
The currency moves come amid rising economic tensions between the United States and China. The US President had imposed a 125 per cent tax on all Chinese goods; meanwhile, in retaliation, China had imposed an 84 per cent tariff on all US imports, escalating the trade wars between the two nations. The Biden administration has labelled the new levies “reciprocal,” targeting trade practices it claims are unfair. The impact on financial markets was swift, the report added.
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However, offering relief to 75 countries, Trump announced the reduction of tariffs to a baseline of 10 per cent. This triggered global benchmark indices to soar on April 9.
The Indian market is closed on April 10, on the occasion of Mahavir Jayanti and is anticipated to open on a positive note following the global market trends on April 11.
Chinese government officials are reportedly preparing emergency economic measures to shore up confidence. A meeting among top policymakers could happen as early as Wednesday, according to sources familiar with the situation, as per the report.
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Despite the pressure, China’s central bank appears unwilling to let the yuan slide uncontrollably. The People’s Bank of China (PBOC) set the daily midpoint at 7.2066 per dollar, the weakest fixing since September 11, 2023. The reference rate, which guides the onshore yuan’s permitted trading range, suggests authorities are attempting to control the currency’s descent. The fixing was 1,282 pips stronger than a Reuters estimate, indicating intervention to steady the market, the report added.
Officials have also directed state-owned banks to scale back dollar purchases, according to sources with direct knowledge, the report added.
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The offshore yuan rebounded roughly 0.7 per cent to 7.3769 in later trading Wednesday after shedding more than 1 per cent the day before.
