Rebecca Feng and Jason Douglas of The Wall Street Journal report that China’s currency has had a rough start to 2025. They write:
Since the beginning of December, the yuan has weakened 1.3% against the dollar and is nearing a 16-month low. A dollar now buys around 7.33 yuan. Many economists predict that the Chinese currency will end the year at around 7.5 per dollar, the weakest in nearly two decades.
The yuan has faced renewed pressure in the run-up to the inauguration later this month of President-elect Donald Trump, who has threatened to impose 60% tariffs on Chinese imports. […]
Investors’ latest clue as to how Chinese authorities might respond came on Thursday when the People’s Bank of China intervened heavily to defend the sagging currency. It announced plans to sell 60 billion yuan, the equivalent of $8.2 billion, of six-month central bank bills in Hong Kong this month, a record amount. Doing so will drain offshore yuan liquidity in Hong Kong and make it harder for traders to short the currency. […]
Beijing is unlikely to offset the impact of higher tariffs with a sharp devaluation and will instead extend its stimulus efforts to counter the drag on the broader economy, said Tao Wang, chief China economist at UBS, at a briefing with reporters on Thursday. She expects one dollar to buy 7.6 yuan by the end of the year.
The Chinese onshore yuan hit its weakest level against the U.S. dollar since September 2023 on Thursday, according to FactSet. The offshore yuan, which trades more freely than the onshore currency, settled at 7.36 a dollar in the early evening.
Read more here.
