China’s yuan hits 16-month low despite firmer guidance
- 06 Jan 2025
China’s yuan hit a fresh 16-month low against the dollar on Monday, weighed by trade concerns and falling yields and defying the central bank’s persistently stronger guidance and assurances that it will keep the currency stable.
The yuan breached the key threshold of 7.3 per dollar for the first time since 2023 on Friday, dragged lower by a broadly stronger greenback, falling Chinese yields and rising global trade tensions. “We expect USD/CNY to continue to grind higher in the weeks ahead, and for the bulk of yuan depreciation to occur once the contours of President-elect Trump’s trade policies are visible,” analysts at Barclays said in a note.
“We maintain our end-2025 forecast of 7.50 but do not rule out much sharper yuan depreciation if President-elect (Donald) Trump once in office implements 60 per cent trade tariffs on China as previously threatened.”
On Monday, the onshore yuan fell to a trough of 7.3286 per dollar, the softest since September 2023. It last traded at 7.3282 around midday.
Its offshore counterpart followed the weakening trend to hit a low of 7.3640 per dollar before trading at 7.3564 around midday.
Major Chinese state-owned banks were seen selling dollars in the onshore spot market in an attempt to slow the pace of yuan declines, but it was unable to offset huge amounts of corporate dollar buying, currency traders said.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2 per cent band.
