CNN

China lets the yuan weaken to 7 against the dollar, its lowest in a decade

Aug 5, 2019, 5:27 AM

Stock Photo...

Stock Photo

(CNN) — The Chinese yuan dropped sharply on Monday to its weakest level against the US dollar in more than a decade, raising fears of further dangerous escalation in the US-China trade war.

The yuan fell after the People’s Bank of China set its daily reference rate for the currency at 6.92, the weakest rate since December. China’s central bank sets a “band” every day within which the yuan’s value is only allowed to move 2% up or down.

In mainland China, one US dollar now buys about 7.03 yuan. In trading outside of China, where the yuan moves more freely, it stands at 7.07 to the dollar. Earlier, it had slipped to a record low offshore.

The symbolically important threshold of 7 was last crossed during the 2008 financial crisis.

The central bank said that it is fully capable of keeping the yuan “reasonable and balanced,” adding in a statement that Monday’s weakness was mostly because of “trade protectionism and new tariffs on China.” President Donald Trump announced a new round of tariffs on the country last week.

Devaluing the yuan is one way China has of retaliating against Trump’s tariffs, but it’s fraught with risk.

The market took the Chinese central bank’s decision to lower the fixing rate that much as a “message of intent” to Trump, said Chris Weston, head of research at Pepperstone Group, in a research note.

He added that the yuan’s depreciation will trigger fears about capital flight from China, along with a subsequent tightening of financial conditions in the Chinese economy.

In mainland China, one US dollar now buys about 7.03 yuan. In trading outside of China, where the yuan moves more freely, it stands at 7.07 to the dollar. Earlier, it had slipped to a record low offshore.

In its statement, China’s central bank said it would take targeted measures as necessary to crack down on speculation and stabilize market expectations.

Citigroup strategist Gaurav Garg saw the decision to “unleash” the exchange rate as a potential response to the trade tensions that “may further complicate the US-China negotiations.”

“US authorities have been sensitive to currency moves,” he wrote in a research note. “They have on multiple occasions blamed currency manipulation to dampen the impact of trade tariffs and have insisted on currency stability as an important part of any agreement between the US and China.”

Markets across Asia tumbled in early trading on fears about the trade tension.

Japan’s Nikkei dropped 1.7% and South Korea’s Kospi lost 2.6%. The Shanghai Composite Index fell 1.6%. In Hong Kong, where protest leaders called on people to participate in strikes across the city, the Hang Seng Index fell as much as 3.1%, the biggest drop since October.

“Risk aversion had certainly been the latest theme for markets, one to weigh on both Asia equities and currencies,” said Jingyi Pan, a market strategist for IG Group. “Trade jitters linger for Asia markets going into the fresh week.”

Trump ratcheted up his country’s trade war with China last week when he announced plans Friday to slap a 10% tariff on $300 billion worth of goods. That means effectively all Chinese exports to the United States will soon be taxed.

Beijing, meanwhile, said it was ready for a fight.

Here are some of the other big moves on Asian markets at 3:00 p.m. Hong Kong time.

  • HSBC shares that are listed in Hong Kong dropped 1.5% after the British banking giant announced John Flint will step down as chief executive. HSBC said a change was needed because of an “increasingly complex and challenging global environment.”
  • Hang Seng Bank, a unit of HSBC and one of Hong Kong’s largest lenders, tumbled 3.8%. In an earnings report, the bank cited a “a challenging operating environment” and slowing economic growth in the city. It forecast full-year GDP growth for Hong Kong to reach between 1% and 1.5%, down from from last year’s 3%. “Downshifts in retail sales and trade growth signal that the economic environment will remain challenging,” the bank said.
  • Last week, the S&P 500 index and the Nasdaq Composite Index both posted the worst week for the year, down 3.1% and 3.9% respectively. The Dow Jones Industrial Average was down 2.6% for the week.

The-CNN-Wire
™ & © 2019 Cable News Network, Inc., a Time Warner Company. All rights reserved.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Today’s Top Stories

CNN

A video recorded by Facebook user Larry Jacquez shows the police response following the shooting in...

Jamiel Lynch, CNN     

At least 3 people killed and 2 officers wounded in a shooting in Farmington, New Mexico, police say

Multiple people were shot and at least three killed in a shooting in Farmington, New Mexico, police said in a Facebook post.

11 months ago

Migrants seeking asylum in the US look through the border wall as volunteers offer assistance on th...

Nouran Salahieh

End of Title 42 policy brings fewer migrants than expected

Southern border communities report fewer migrants, but concerns remain about overcrowded processing and detention facilities.

11 months ago

EVERETT WALMART, EVERETT, WASHINGTON, UNITED STATES - 2023/04/19: An empty cart is seen near an emp...

Nathaniel Meyersohn, CNN

The real reasons stores such as Walmart and Starbucks are closing in big cities

Several forces are pushing Walmart and Starbucks out of some city centers: a glut of stores, people working from home, online shopping, exorbitant rents, crime and public safety concerns, and difficulty hiring workers.

11 months ago

Gay rights supporters attend the annual Pink Dot event in Singapore in June 2022. Photo credit: Ros...

Heather Chen

A law that cancels cancel culture? This country is considering it

   (CNN) — Cancel culture, the online trend of calling out people, celebrities, brands and organizations — rightly or wrongly — for perceived social indiscretions or offensive behaviors, has become a polarizing topic of debate. To some, it’s an important means of social justice and holding powerful figures to account. But to others, it’s often “misused and misdirected” and has become […]

11 months ago

Vatican Museum restorer Alice Baltera works on the bronze Hercules statue, in the Round Hall of the...

Francesco Sportelli, Associated Press

Vatican experts uncovering gilded glory of Hercules statue struck by lightning

Vatican Museum restorers are working to remove centuries of grime from the largest known bronze statue of the ancient world: the gilded Hercules Mastai Righetti.

11 months ago

Linda Yaccarino, here in 2022, is leaving NBCUniversal amid reports that Elon Musk has selected her...

Chris Isidore

Elon Musk names NBCU ad chief Linda Yaccarino as Twitter CEO

 (CNN) — Elon Musk on Friday named longtime media executive Linda Yaccarino as the new CEO of Twitter, months after he promised to step back from the role. “I am excited to welcome Linda Yaccarino as the new CEO of Twitter!” Musk wrote in a tweet on Friday. He said she “will focus primarily on business operations, […]

11 months ago

Sponsored Articles

close up of rose marvel saliva blooms in purple...

Shannon Cavalero

Drought Tolerant Perennials for Utah

The best drought tolerant plants for Utah can handle high elevations, alkaline soils, excessive exposure to wind, and use of secondary water.

Group of cheerful team members high fiving each other...

Visit Bear Lake

How To Plan a Business Retreat in Bear Lake This Spring

Are you wondering how to plan a business retreat this spring? Read our sample itinerary to plan a team getaway to Bear Lake.

Cheerful young woman writing an assignment while sitting at desk between two classmates during clas...

BYU EMBA at the Marriott School of Business

Hear it Firsthand: 6 Students Share Their Executive MBA Experience at BYU’s Marriott School of Business

The Executive MBA program at BYU offers great opportunities. Hear experiences straight from students enrolled in the program.

Skier being towed by a rider on a horse. Skijoring....

Bear Lake Convention and Visitors Bureau

Looking for a New Winter Activity? Try Skijoring in Bear Lake

Skijoring is when someone on skis is pulled by a horse, dog, animal, or motor vehicle. The driver leads the skiers through an obstacle course over jumps, hoops, and gates.

Banner with Cervical Cancer Awareness Realistic Ribbon...

Intermountain Health

Five Common Causes of Cervical Cancer – and What You Can Do to Lower Your Risk

January is National Cervical Cancer Awareness month and cancer experts at Intermountain Health are working to educate women about cervical cancer.

Kid holding a cisco fish at winterfest...

Bear Lake Convention and Visitors Bureau

Get Ready for Fun at the 2023 Bear Lake Monster Winterfest

The Bear Lake Monster Winterfest is an annual weekend event jam-packed full of fun activities the whole family can enjoy.

China lets the yuan weaken to 7 against the dollar, its lowest in a decade