China’s currency has weakened to a 16-month low as the potential for sharp tariff hikes by the incoming Trump administration fueled concern over growth prospects for the world’s second-largest economy.
The onshore renminbi fell 0.1 percent to Rmb7.34 against the dollar on Wednesday, the weakest since September 2023, despite the People’s Bank of China keeping the key rate steady ahead of Donald Trump’s inauguration this month.
China’s currency is allowed to trade within 2 percent of the daily rate set by the central bank, and the exchange rate is near the lower end of that trading band.
The selling pressure partly reflects fears that Trump’s proposed high tariffs on Chinese goods would force the PBoC to weaken the renminbi to offset their impact on exports, which have helped the country maintain economic growth amid weak demand. internal consumer.
“The market is impatient and wants a hit on the renminbi,” said Wee Khoon Chong, a senior markets strategist at BNY.
The PBoC on Wednesday announced a daily fixed rate of Rmb7.1887 against the dollar, almost unchanged from Tuesday’s fix of Rmb7.1879. But pressure on the exchange rate increased as strong US economic data sent the dollar higher on Tuesday.
The selling pressure on the renminbi is “basically a reflection of the Trump trade,” said Ju Wang, head of China’s largest foreign exchange and rates strategy at BNP Paribas. “The market has been doing this since the US election. . . we think there have been too many prices, but the market doesn’t want to give up.”
Wang said the PBoC appeared to be “in a wait-and-see mode”.
The central bank wants to keep the exchange rate stable as it waits for more clarity on Trump’s trade policies, analysts said, adding that any slight easing of regulation could risk a further sell-off in the Chinese currency.
Trump has said he will impose tariffs of up to 60 percent on China.
Chinese stocks also fell on Wednesday, with mainland China’s CSI 300 index down 0.3 percent and Hong Kong’s benchmark Hang Seng down 1.1 percent.
