China’s Yuan Hits Lowest Level Since 2023
China’s yuan hit its weakest point since 2023 on Tuesday, following a slight easing of the central bank’s control over the currency.
This move comes amid a deepening trade dispute between China and the United States, as President Donald Trump threatened to impose further tariffs on Chinese goods. The tensions between the two largest economies show little signs of easing, and analysts suggest that China’s decision to weaken its currency could be aimed at mitigating the impact of the ongoing trade war on exports.
China Attempts to Counteract Trade War by Easing Currency Control
As the yuan continues to slide, analysts speculate that the Chinese government may allow further depreciation to make its exports more competitive. However, a sharp drop in the yuan could lead to unwanted capital outflows and jeopardize financial stability. Experts like Vishnu Varathan from Mizuho Bank suggest that while China may soften the yuan, they are unlikely to allow a steep depreciation, prioritizing economic stability.
In response to the U.S. tariffs, market expectations have grown that China may eventually devalue its currency further, although the People’s Bank of China (PBOC) appears committed to maintaining a level of control over the situation. The PBOC set the official midpoint rate for the yuan at 7.2038 per dollar, a level not seen since September 2023, though it remains firmer than market expectations.
Impact of Tariffs and Potential Negotiations on the Yuan’s Future
Traders and analysts are keeping a close eye on the possibility of the yuan crossing the key 7.2 per dollar mark, which could signal further depreciation. However, the market remains cautious, with some speculating that China might soften its stance and begin talks with other countries to address tariffs. Although the yuan has weakened by about 1% against the dollar so far this month, the situation remains fluid as Beijing navigates the effects of escalating tariffs and looks to manage the broader economic fallout.
Despite concerns about the yuan’s depreciation, analysts believe that a sharp drop in the currency is unlikely. Larry Hu, chief economist at Macquarie, argued that Beijing would avoid a steep depreciation, preferring a more controlled approach. With the ongoing tariff threats, China is expected to employ a mix of tariff and non-tariff measures, but a drastic depreciation of the yuan is not anticipated at this stage.
In equity markets, stocks in China and Hong Kong rose on Tuesday, buoyed by stronger regional markets and government-backed support, providing a slight sense of stability amid the ongoing trade uncertainty.
Alex is Editor-in-Chief of Coindoo and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
