Yuan weakens with China's backing

 
 

China has confirmed they are willing to let the yuan fall to support the economy.

The central bank is willing for it's worth to weaken to 6.8 per dollar, matching last year's record decline of 4.5 percent, according to a policy source in Reuters today.

The yuan is already trading at it's lowest in five years. The central bank has reportedly proposed to assist the decline in case it triggers the kind of capital outflows (money exiting the country) which upset the economy earlier this year.

The move may also be a reaction to recent criticism from America. U.S. Republican Presidential nominee, Donald Trump has criticised China recently for manipulating it's money. In a tweet yesterday, the controversial candidate claimed if elected 'cheaters' (former trading partners) will be given penalties:

"The @USCHAMBER must fight harder for the American worker. China, and many others, are taking advantage of U.S. with our terrible trade pacts."

Following Brexit, many market currencies have fallen; though the yuan has certainly depreciated the most. It will be interesting to see what point the central bank will intervene before the situation really becomes problematic.

 





 

 
 
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