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Yuan Reaches an Eight Year Low As China Weakens Its Currency

November 15, 2016
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China has more control over its currency to maintain its value in the global trade markets. On Tuesday, China weakened Yuan against the US dollar, causing the value of the currency to hit an all time low in the past 8 years. The continuously increasing price of the US dollar puts pressure on the Chinese currency.

The Central People’s Bank of China has set the value of Yuan at 6.8495 which is 0.30% less than the value set on Monday. The rising of greenback and expectation of increase in the interest rates of US has forced the Yuan to continuously go down in value. In recent weeks, the currency has experienced six year lows. This is due to the campaign of the US President elect Donald Trump as he promised to increase spending and reduce taxes.

Since 2008, Yuan hasn’t reached such a low value even though it touched levels above 6.83 during 2009-2010. China imposes restriction on rising and falling of Yuan by 2% on either side to maintain its control. During his presidential campaign, Donald Trump directly attacked the Chinese government blaming it on keeping Yuan undervalued so as to increase exports and make imports costly. Donald Trump threatened that he will declare Beijing as a currency manipulator once he assumes office. However, there are no clear information on the policy updates from the Trump administration. In October, the US Treasury cleared China of undervaluing Yuan for trade benefits.