China blames Donald Trump’s trade war tariff threat as yuan weakens below 7 to the US dollar
- First time yuan has dropped below level since offshore trading started in Hong Kong in 2010, and the lowest in the onshore market since April 2008
- Drop came only days after the US president threatened to impose a new 10 per cent tariff on US$300 billion worth of Chinese products from September 1
China’s yuan exchange rate weakened below the psychologically important level of 7 to the US dollar in both onshore and offshore markets on Monday, with the country’s central bank saying the drop was caused by “expectations of more tariffs on China”.
It is the first time that the yuan has dropped below the level since offshore trading started in Hong Kong in 2010, and the lowest in the onshore market since April 2008, signalling the possibility of a currency war with the United States.
The People’s Bank of China (PBOC) blamed the drop “to unilateral trade protectionism, as well as expectations of more tariffs on China”.
“The PBOC has the experience, confidence and ability to keep the yuan exchange rate basically stable at a reasonable equilibrium level,” the central bank added, without elaborating on what it considered an appropriate level.