China's currency, the renminbi, has weakened to its lowest point in 16 months, driven by robust US economic data and concerns about potential steep tariffs imposed by the incoming Trump administration. Fears that these tariffs could harm Chinese exports are pushing the renminbi closer to its trading band's lower limit. The US dollar index has also surged following strong US jobs and services data, which suggests a slower pace of Federal Reserve rate cuts. Meanwhile, China is easing monetary policy to combat deflationary pressures.
China ’s currency has weakened to a 16-month low following strong US economic data overnight and as the potential for sharp tariff increases from the incoming Trump administration fuels concern over growth prospects for the world’s second-largest economy. The onshore renminbi fell 0.1 per cent to Rmb7.33 against the dollar on Wednesday, its weakest since September 2023, in spite of the People’s Bank of China ’s maintenance of a steady fixing rate ahead of Donald Trump’s inauguration on January 20.
But many economists believe it is holding off on announcing more spending plans while it awaits Trump’s inauguration to get more clarity on potential tariffs. The president-elect has said he would impose tariffs as high as 60 per cent on China. The PBoC on Wednesday announced a daily fixing rate of Rmb7.1887 against the dollar, almost unchanged from Tuesday’s fixing of Rmb7.1879. But pressure on the exchange rate mounted after the strong US economic data drove up the dollar on Tuesday.
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