Economy

China's currency falls as more USA sanctions look likely

China's currency falls as more USA sanctions look likely”

"The real effective exchange rate is one benchmark, and on that measure the yuan looks fairly valued at the moment", said Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore.

Last Monday, China let the yuan drop to its lowest value since 2008.

The exchange rate of China's yuan to the dollar hit the symbolic threshold of 7 to 1 at the start of the week, fuelling further speculation about a deliberate move by Beijing to boost support for its exports while engaged in a trade war with the U.S., the world's largest economy.

The US dollar (USD) wrapped up its after-hours session just a tad higher versus most of its counterparts late Thursday, but it was the Chinese yuan (CNY) that stole the show after China's central bank fixed the currency and elevated it on a stronger position.

White House trade adviser Peter Navarro had strong words for China after its recent moves against the United States in the ongoing trade war.

Mr Trump again accused the country of "depressing their currency", but his comments on the trade talks sent the exchange rate even lower.

Here are four things to know about how China manages its currency and what a currency war could mean for the two countries.

The People's Bank of China set the daily reference point at 7.0136 yuan per dollar.

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China devalued the yuan in 2015 in an attempt to curb depreciation pressure, stunning global markets.

- an annual $20 billion bilateral surplus with the U.S.

He said the Trump administration's actions call into question the legitimacy of the whole process for evaluating currency manipulations. "You can debate whether that was the right choice", says Setser.

"China wants to make a deal so badly".

The yuan was headed for a loss against the US dollar of about 1.6% for the week, following Monday's drama when it crossed the key 7 per dollar level for the first time since the global financial crisis. It's really going to impact consumers even more and it's certainly, with the Chinese announcement that they're going to stop buying USA agricultural goods, that's going to hurt our farmers.

Meanwhile, trade frictions are likely to continue to encumber China's yuan, with no resolution to the Washington-Beijing conflict in sight, as increasingly negative monetary sentiment adds to worries that the global economy may fall in a turmoil instead of the other way around.

USA and Chinese negotiators met in Shanghai in late July for the first time since talks collapsed in May, and were due to hold another round in September.

The Fed trimmed rates by 25 basis points for the first time since the financial crisis on July 31, but China did not follow as some market watchers had expected.



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