China’s yuan has dropped to its lowest level since 2023. The move followed a subtle shift by the central bank. The People’s Bank of China (PBOC) allowed the currency to weaken slightly. This surprised traders, who are now closely watching for further easing. The yuan weakens as China faces global trade headwinds.
Interestingly, the PBOC’s latest midpoint was set at 7.2038 per dollar. This level was the weakest since September 2023. Yet, it was stronger than expected, signaling cautious control. Still, the yuan weakens within the band it’s allowed to trade—2% above or below the midpoint.
The ongoing trade war between the U.S. and China also intensifies market uncertainty. With Trump hinting at more tariffs, China appears ready to respond. Many experts believe a softer yuan can help shield exports from tariff impacts.
Even though a weaker yuan supports trade, it comes with risks. A sharp decline could trigger capital flight and harm financial stability. That’s why the PBOC moves gradually. They want to balance economic support without triggering panic.
Vishnu Varathan from Mizuho Bank explains this well. He notes that while Beijing may tolerate some softness, a steep fall isn’t likely. Similarly, Larry Hu of Macquarie says China still prefers currency stability. The government likely wants to maintain its global image in uncertain times.
Both onshore and offshore yuan slid past 7.34 against the dollar in early trading. Offshore yuan even touched 7.3501, the weakest since 2023. Analysts now eye 7.35 as the next critical level. If broken, the yuan could revisit lows not seen since the 2008 crisis.
So far this month, the yuan has lost over 1% against the dollar. And if tariffs keep rising, further losses are possible. Still, few expect a drastic depreciation beyond 10%.
For the latest updates and expert forex insights, explore our analysis hub: FIXIO Markets Blog. Stay informed to navigate shifting currency trends with confidence.
Yuan weakens as China loosens currency controls to combat trade pressure. Learn how this shift could impact global forex trends.
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