Chinese Media Downplays Yuan’s Drop Due to Manipulator Label
Chinese state media supported the government’s move on yuan’s weakening, saying it was normal. The press stressed on economic benefits that come with a flexible currency.
According to Xinhua News Agency’s Monday report, the yuan falling beyond 7 a dollar is a result of a market drive. The move shows the exchange rate is now more flexible. The report also said it’s normal to have market sentiments fluctuate amid rising external risks.
People’s Daily said the yuan’s future is unpredictable. It said the central bank is now more tolerant of fluctuations compared to during the 2016 depression cycle. The newspaper also published an article on one of its WeChat accounts. It said that markets play a more significant role in the yuan’s exchange rate.
On Monday, yuan’s weakening to its lowest level in more than ten years. It caused Trump administration to label China – a currency manipulator worsening the U.S-China trade war. The move is symbolic but highlights the deteriorating trade relationship between the two giant economies.
On Tuesday, the yuan pared losses in Hong Kong after China’s central bank fixed daily rate stronger than 7 per dollar. On Monday, Yi Gang the People’s Bank of China governor said China wouldn’t use yuan as a tool to deal in trade disputes.
According to a Chinese Security journal’s commentary, the domestic financial media also eased investor’s nerves to say PBOC was still keen on it bottom-line-mindset. Policymakers were considering a range of risks in managing exchange rates.
The journal also emphasized that there was no need to worry about yuan steep depreciation or shocks to asset prices amid capital outflow. It said that there was no basis for the yuan to weaken significantly.
China’s yuan stabilizes, investor sentiment remains delicate
On Tuesday, the yuan steadied after overnight declines. Market sentiments remained delicate a day after the sharp selloff in global markets driven by fear over escalating trade war.
China’s offshore yuan prolonged the previous day’s declines and slightly weakened to 7.1382. It’s lowest since 2010 when international trading in the Chinese currency began. However, it pulled back to 7.0690 after Beijing fixed it on Tuesday.
Early on Tuesday, the onshore Chinese yuan dropped to an 11-year low brushing 7.0699 per dollar. Chinese move to breach the 7-per dollar on Monday. It happened for the first time after the U.S imposed 10% tariffs on $300 billion of Chinese imports.
According to analysts, China’s decision was an indication it would not back down on the trade war that was already affecting global growth.
But PBOC’s mid-point fixing on Tuesday of 6.9683 was firmer than what the market expected which slowed down the yuan’s retreat.
On Monday Steven Mnuchin, the U.S Treasury Secretary stated that the U.S was sure that China was manipulating its currency. He said that the U.S would engage the IMF to eliminate the unfair competition from China.
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