China, having let the yuan cross the once sacred red line of 7 per dollar, will ...
BEIJING/HONG KONG - China, having let the yuan cross the once sacred red line of 7 per dollar, will allow its currency to fall further and may even risk U.S. anger by using it as a bargaining chip in already thorny trade talks, market participants believe.
The currency’s 3.8% decline in August as a whole was its sharpest monthly fall in 25 years, prompting U.S. President Donald Trump to launch a fresh salvo in the more-than 15-month tariff war by labelling China a currency manipulator. “It is unlikely that policymakers will impose a level on themselves, having got the psychological seven out of the way,” said Frances Cheung, Asia strategist at Westpac Banking Corporation in Singapore.
“Some people have predicted that the yuan may depreciate to 7.2-7.3 if the Sino-U.S. trade war worsens, we cannot rule out that possibility,” said Yu Yongding, a former policy adviser to the People’s Bank of China .Another source familiar with the PBOC’s thinking said it was more difficult for the authorities to intervene in an increasingly market-driven currency.
The weakening reflected economic fundamentals, but also served to warn the U.S. that further depreciation was possible, said Cliff Tan, head of global markets research for East Asia in Hong Kong. “Look at it as a bit of a defensive parry in the bilateral trade negotiation.”
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